What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-17 compared with 2024-03-15 · 404 added, 374 removed, 535 unchanged (59% of the section changed)

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Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2024 and 2023

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Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023, and 2022

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING STANDARDS UPDATES

BUSINESS ACQUISITION 36

SALE OF SERVUS BRAND AND RELATED ASSETS 37

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GOODWILL AND OTHER INTANGIBLE ASSETS

OTHER ASSETS 40

ACCRUED EXPENSES AND OTHER LIABILITIES

LONG-TERM DEBT

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SEGMENT INFORMATION

RESTRUCTURING CHARGES 51

COMMITMENTS AND CONTINGENCIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Rocky Brands, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Rocky Brands, Inc.

and subsidiaries (the “Company”) as of December 31, 2024 , the related consolidated statement of operations, shareholders’ equity, and cash flows, for the period ended December 31, 2024 , and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 , and the results of its operations and its cash flows for the year ended December 31, 2024 , in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024 , based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 17, 2025 , expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill and Other Intangible Assets - Wholesale and Retail Reporting Units and Muck Trademark – Refer to Notes 1 and 7 to the financial statements

Critical Audit Matter Description

The Company's evaluation of goodwill and indefinite-lived intangible assets for impairment involves the comparison of the fair value of each reporting unit or asset to its respective carrying values.

The Company uses a combination of the income and market approaches to estimate the fair value of its reporting units in its goodwill impairment analysis.

The income approach requires management to estimate a number of factors for each reporting unit, including forecasts of future revenues, EBITDA margins, and discount rates.

The market approach requires management to estimate fair value using comparable marketplace fair value data from within a comparable industry grouping or a comparable marketplace transactional multiple.

The Company uses the relief from royalty method to estimate the fair value of the indefinite-lived intangible assets trademark.

This method estimates the fair value of an intangible asset by determining the present value of the cost savings realized by the owner of the intangible asset as a result of not having to pay a stream of royalty payments to another party.

The selection of companies in the comparable industry group for the reporting units and changes in business and valuation assumptions for both the reporting units and the Muck trademark could have a significant impact on the valuation of the reporting units or the Muck trademark and the amount of a goodwill or indefinite-lived trademark impairment charge, if any.

The Company performed its annual impairment assessment of the Muck trademark as of December 31, 2024 and determined that the fair value of the Muck indefinite-lived intangible asset was less than its carrying amount.

As a result, the Company recorded an impairment charge of $4.0 million to reduce the carrying amount to be equivalent to the estimated fair value of $37.9 million as of December 31, 2024.

We identified the valuation of the Wholesale and Retail reporting units and the Muck trademark indefinite-lived intangible asset as a critical audit matter due to the materiality of the assets' carrying values, the difference between the fair values and the carrying values of the reporting units, the sensitivity of the fair value calculation to changes in significant assumptions, and because of the underperformance compared to historical forecasts at each of the businesses.

Auditing management's judgments used in the quantitative assessment regarding significant assumptions such as future revenue growth, EBITDA margins, the selection of discount rates, and the selection of royalty rates requires a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the fair value of goodwill for the Wholesale and Retail reporting units and the Muck trademark indefinite-lived intangible asset included the following, among others:

We tested the effectiveness of controls over the goodwill and indefinite-lived intangible asset impairment analyses, including those over the development of significant assumptions such as future revenue growth, EBITDA margins, discount rates, and royalty rates.

We evaluated the reasonableness of management's forecasted future revenue growth and EBITDA margins by comparing historical forecasts to actual results and comparing future forecasts to business strategies, growth plans, and third-party economic and industry data.

With the assistance of our fair value specialists, we evaluated the discount rate and royalty rate used by the Company in developing the fair value estimates by testing the source information underlying the determination of the discount rate and royalty rate and by developing a range of independent estimates for the discount rate and royalty rate.

/s/ DELOITTE & TOUCHE LLP

Columbus, Ohio

March 17, 2025

We have served as the Company's auditor since 2024.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Rocky Brands, Inc.

and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and the financial statement schedule listed in the index at Item 15(a)(2), (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 15, 2024 expressed an unqualified opinion.

We have audited the accompanying consolidated balance sheet of Rocky Brands, Inc.

and Subsidiaries (the “Company”) as of December 31, 2023, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involve our especially challenging, subjective, or complex judgment.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Indefinite-Lived Identified Intangibles in Conjunction with Annual Impairment Testing

Description of the Matter

At December 31, 2023, the Company’s indefinite-lived intangible assets were approximately $126.5 million, which included $78.7 million of trade names and trademarks and $47.8 million of goodwill.

As discussed in Note 1 to the financial statements, indefinite-lived intangible assets are tested for potential impairment annually or when conditions indicate impairment may have occurre d.

This test was performed in the fourth quarter of 2023 .

Auditing management’s indefinite-lived intangible assets, including goodwill, was challenging because there is significant judgment required in determining the methodologies and assumptions used to estimate the fair values of the Company’s goodwill by reporting unit, and trade names and trademarks by brand.

In particular, the fair value estimates were sensitive to significant judgment assumptions including future cash flows, long-term growth rates of the business, financial projections, operating margins, weighted average cost of capital and other factors such as:

discount rates, royalty rates, cost of capital, and market multiples.

These estimates and assumptions require management’s judgment, and changes to these estimates and assumptions could materially affect the determination of fair value and/or impairment for each of the Company’s indefinite-lived intangible assets.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s intangible asset impairment review process.

To test the estimated fair value of the Indefinite-Lived Intangible Assets, we performed audit procedures that included, among others, involving our valuation specialists in evaluating the methodologies used and significant assumptions described above, and testing the underlying data used by the Company for completeness and accuracy.

We compared the significant assumptions used by management to current industry and economic trends, recent historical performance, changes to the reporting unit’s business model and other relevant factors.

We evaluated the reasonableness of the Company’s financial projections used in the analysis.

We assessed the historical accuracy of management’s estimates and significant assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in the assumptions.

We evaluated the incorporation of the applicable assumptions into the model and tested the model’s computational accuracy and performed a sensitivity analysis on certain key assumptions.

We have served as the Company's auditor since 2007.

We served as the Company’s auditor from 2007 to 2023.

/s/ Schneider Downs & Co., Inc.

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Current portion of long-term debt

Accrued expenses:

Salaries and wages

Taxes – other

Accrued freight

Accrued interest

Income tax payable

Accrued expenses and other liabilities

23,977 18,112

Total current liabilities

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LONG-TERM TAXES PAYABLE

LONG-TERM LEASE

LONG-TERM LEASES

DEFERRED INCOME TAXES

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Additional Paid-in Capital

Comprehensive

Shareholders'

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( 4,538 ) ( 4,538 )

Repurchase of common stock

Stock issued for options exercised, including tax benefits

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( 4,565 ) ( 4,565 )

Repurchase of common stock

Stock issued for options exercised, including tax benefits

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( 4,611 ) ( 4,611 )

Repurchase of common stock

Stock issued for options exercised, including tax benefits

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7,454 $ 73,866 $ 158,358 $ 232,224

(1) Quarterly dividend was increased from $0.14 per share to $0.155 per share in the third quarter of 2021.

See notes to Consolidated Financial Statements

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Depreciation and amortization

Amortization of debt issuance costs

Intangible impairment charge

Noncash lease expense

Provision for bad debts

Stock compensation expense

Loss on term loan extinguishment

Amortization of debt issuance costs

Gain on sale of business

Deferred income taxes

Loss (gain) on disposal of assets

Gain on sale of business

Stock compensation expense

Change in assets and liabilities:

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Accounts payable

Operating lease liability

Accrued and other liabilities

Contract liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

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Proceeds from the sale of assets

Acquisition of business, net of cash acquired

Proceeds from sale of business

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

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Dividends paid on common stock

Net cash (used in) provided by financing activities

Net cash used in financing activities

DECREASE IN CASH AND CASH EQUIVALENTS

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("Lifestyle"), Five Star Enterprises Ltd.

("Five Sta r"), Rocky Brands Canada, Inc.

("Rocky Brands Canada"), Rocky Brands US, LLC, Rocky Brands International, LLC, Lehigh Outfitters, LLC, US Footwear Holdings, LLC, Rocky Brands (Australia) Pty Ltd., Mexico FW Holdings, S.

("Five Sta r"), Rocky Brands US, LLC, Rocky Brands International, LLC, Lehigh Outfitters, LLC, US Footwear Holdings, LLC, Rocky Brands (Australia) Pty Ltd., Mexico FW Holdings, S.

de C.V., Rocky Footwear (Chuzhou) Co.

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All inter-company transactions have been eliminated.

Business Activity - We are a leading designer, manufacturer and marketer of premium quality footwear marketed under a portfolio of well recognized brand names including Rocky, Muck, Georgia Boot, Durango, XTRATUF, Lehigh, Ranger and the licensed brand Michelin.

Business Activity - We are a leading designer, manufacturer and marketer of premium quality footwear marketed under a portfolio of well recognized brand names including Muck, Rocky, Georgia Boot, Durango, Lehigh, XTRATUF, Ranger and the licensed brand Michelin.

Our brands have a long history of representing high quality, comfortable, functional and durable footwear and our products are organized around six target markets:

outdoor, work, duty, commercial military, western and military.

work, outdoor, western, commercial military, duty and military.

In addition, as part of our strategy of outfitting consumers from head-to-toe, we market complementary branded apparel and accessories that we believe leverage the strength and positioning of each of our brands.

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Wholesale includes sales of footwear and accessories to several classifications of retailers, including sporting goods stores, outdoor specialty stores, online retailers, marine stores, independent retailers, mass merchants, retail uniform stores and specialty safety shoe stores.

Our Retail business includes direct sales of our products to consumers through our e-commerce websites, marketplaces, our Rocky Outdoor Gear Store, and Lehigh businesses.

Our Retail business includes direct sales of our products to consumers through our e-Commerce websites, third -party marketplaces, our Rocky Outdoor Gear Store and Lehigh businesses.

Contract Manufacturing 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.

See Note 19 for further information.

See Note 19 - Segment Information for further information.

Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Foreign Currency - We have determined that the functional currency for our international subsidiaries is the USD as this is the currency in which the entities primarily generate and expend cash.

Monetary assets and liabilities that are in a currency other than the USD are remeasured at the rate prevailing at year end.

Revenue and expenses in a foreign currency are remeasured at rates that approximate those in effect at the time of remeasurement.

Resulting gains and losses from remeasuring the foreign currency to the USD are included in net income.

Foreign currency transaction gains and losses are not material for any period presented.

Cash and Cash Equivalents - We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

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that is not federally insured.

Allowance for Credit Losses - We maintain an allowance for credit losses on accounts receivable that represents estimated losses resulting from customers’ failure to make required payments.

We evaluate the allowance for credit losses based on a review of current customer status and historical collection experience along with current and reasonable supportable forecasts of future economic conditions.

Trade Receivables - Trade receivables are presented net of the related allowance for credit losses of approximately $ 1.8 million and $ 3.5 million at December 31, 2023 and 2022 , respectively.

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

However, estimates of the allowance in any future period are inherently uncertain and actual allowances may differ from these estimates.

Allowance for Credit Losses - We maintain an allowance for credit losses resulting from the inability of our customers to make required payments.

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.

Estimates of the allowance in any future period are inherently uncertain and actual allowances may differ from these estimates.

If actual or expected future allowances were significantly greater or less than established reserves, a reduction or increase to bad debt expense would be recorded in the period this determination was made.

Our credit policy generally provides that trade receivables will be deemed uncollectible and written-off once we have pursued all reasonable efforts to collect on the account.

In accordance with ASC 606, the return reserve liability netted against trade receivables was $ 1.5 million and $ 2.1 million at December 31, 2023 and 2022 , respectively.

Trade receivables are presented net of the related allowance for credit losses of approximately $ 1.0 million and $ 1.8 million at December 31, 2024 and 2023 , respectively.

Concentration of Credit Risk - We have significant transactions with a large number of customers.

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We are not aware of any governmental or economic restrictions that would alter our current sourcing operations.

Inventories - Inventories are valued at the lower of cost, determined on a first -in, first -out (FIFO) basis, or net realizable value (NRV).

Reserves are established for inventories when the NRV is deemed to be less than its cost based on our periodic estimates of NRV.

Inventories - Inventories are valued at the lower of cost or net realizable value, on a first -in, first -out (FIFO) basis.

We reduce the carrying value of inventories to the lower of cost or net realizable value for excess and obsolete inventories based upon assumptions about future demand and market conditions.

If we estimate the net realizable value of our inventory is less than the cost of the inventory, we record an adjustment equal to the difference between the cost of the inventory and the estimated net realizable value.

The adjustment is recorded as a charge to cost of goods sold.

If changes in demand or market conditions result in reductions to the estimated net realizable value of our inventory below our previous estimate, we would further adjust the value of our inventory in the period in which we made such a determination.

Property, Plant and Equipment - We record fixed assets at historical cost and generally utilizes the straight-line method of computing depreciation for financial reporting purposes over the estimated useful lives of the assets as follows:

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For income tax purposes, we generally compute depreciation utilizing accelerated methods.

Goodwill and Other Intangible Assets - Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets of acquired businesses.

Goodwill and Other Intangible Assets - Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets.

Indefinite-lived intangibles include trademarks and trade names.

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Determining whether an impairment loss occurred requires a comparison of the carrying amount to the sum of the future forecasted undiscounted cash flows expected to be generated by the asset group.

For additional details on goodwill and intangible assets, including information related to our annual test, see Note 8 .

For additional details on goodwill and intangible assets, including information related to our annual test, see Note 7 - Goodwill and Other Intangible Assets .

Leases - Our leases primarily consist of office buildings, distribution centers, manufacturing facilities and equipment.

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We enter into contracts with third parties to lease specifically identified assets.

The Company's incremental borrowing rate is used to determine the present value of future lease payments unless the implicit rate is readily determinable.

Most of our leases have contractually specified renewal periods.

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We determine the lease term for each lease based on the terms of each contract and factor in renewal and early termination options if such options are reasonably certain to be exercised.

Under FASB ASC Topic

842, Leases, we have elected the practical expedient to account for lease components and nonlease components associated with individual leases as a single lease component for all leases.

We have elected the practical expedient to account for lease components and nonlease components associated with individual leases as a single lease component for all leases.

In addition, we have elected to account for multiple lease components as a single lease component.

may include variable lease costs such as payments based on changes to an index, payments based on a percentage of retail store sales, and maintenance, utilities, shared marketing or other service costs that are paid directly to the lessor under terms of the lease.

Our leases may include variable lease costs such as payments based on changes to an index, payments based on a percentage of retail store sales, and maintenance, utilities, shared marketing or other service costs that are paid directly to the lessor under terms of the lease.

We recognize variable lease payments when the amounts are incurred and determinable.

We have elected to account for leases of

twelve months or less as short-term leases and accordingly do

not recognize a right-of-use asset or lease liability for these leases.

We have elected to account for leases of twelve months or less as short-term leases and accordingly do not recognize a right-of-use asset or lease liability for these leases.

We recognize lease expense for these leases on a straight-line basis over the lease term.

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Comprehensive income is composed of two subsets – net income and other comprehensive income.

There were no material other comprehensive income items therefore no Statements of Comprehensive Income were presented.

Revenue Recognition - Revenue is recognized when a performance obligation is completed at a point in time and when the customer has obtained control.

Control passes to the customer when they have the ability to direct the use of and obtain substantially all the remaining benefits from the goods transferred.

We recognize wholesale and e-commerce revenue at the time the products are shipped and retail store revenue transactions at the point of sale.

The amount of revenue recognized is based on the transaction price, which represents the invoiced amount less estimated sales discounts and returns based upon specific customer agreements and historical trends.

The Company presents revenue gross of fees and sales commissions.

Sales commissions are expensed as incurred and are recorded in operating expenses in the accompanying consolidated statements of operations.

The Company's customer contracts do not have a significant financing component due to their short durations, which are typically effective for one year or less and have payment terms that generally range from net 30 to net 120 days.

There were no material other comprehensive income items, and, therefore, no Statements of Comprehensive Income were presented.

Revenue Recognition - Revenue is recognized when the 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 or at the time of sale for our retail stores.

Revenue is measured as the amount of consideration we expect to receive in exchange for the transfer of our products at a point in time and consists of either fixed or variable consideration or a combination of both.

Payment terms vary by sales channel and customer.

For our wholesale channel and our Lehigh business-to-business channel, terms generally require the customer pay within 30 to 60 days of product shipment.

For our retail store, e-Commerce channel, and third -party marketplace channel, payment is due at the time of sale.

Cost of Goods Sold - Cost of goods sold represents our costs to manufacture products in our own facilities, including raw materials costs and all overhead expenses related to production, as well as the cost to purchase finished products from our third -party manufacturers.

Cost of goods sold also includes the cost to transport these products to our distribution centers.

- We expense advertising costs as incurred.

Advertising - We expense advertising costs as incurred.

Advertising expense was approximately $

million, $ 15.4

million and $ 17.9 million for

and 2021 , respectively.

million and $

, respectively.

Shipping Costs - All shipping costs billed to customers have been included in net sales.

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

Receivables consist primarily of amounts due from our customers, net of allowances;

amounts due from employees (salespersons’ advances in excess of commissions earned and employee travel advances);

other customer receivables, net of allowances;

and expected insurance recoveries.

The carrying amounts of our long-term credit facilities and other short-term financing obligations also approximate fair value, as they are comparable to the available financing in the marketplace during the year.

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

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

Some assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances.

These assets primarily include goodwill and other indefinite lived intangible assets that have been reduced to fair value when impaired.

Assets that are written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment occurs.

We incurred $ 4.0 of impairment relating to our trademarks during the year ended December 31, 2024, to write-down the carrying value of the Muck trademark to the fair value of the asset.

Deferred Compensation Plan Assets and Liabilities - On December 14, 2018, our Board of Directors adopted the Rocky Brands, Inc.

Executive Deferred Compensation Plan (the "Executive Deferred Compensation Plan"), which became effective January 1, 2019.

The Executive Deferred Compensation Plan is an unfunded nonqualified deferred compensation plan in which certain executives are eligible to participate.

The Executive Deferred Compensation Plan is a nonqualified deferred compensation plan in which certain executives are eligible to participate.

The deferrals are held in a separate trust, which has been established for the administration of the Executive Deferred Compensation Plan.

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The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1 ).

Effective August 18, 2020, our Board of Directors adopted a second deferred compensation plan (the "Dominican Plan").

The Dominican Plan is an unfunded nonqualified deferred compensation plan for key employees at our Dominican Republic manufacturing facility.

The funds are held in a separate trust, which has been established for the administration of the Dominican Plan.

The trust liabilities are classified as trading securities within deferred liabilities in the accompanying consolidated balance sheets, with changes in the deferred compensation charged to operating expenses in the accompanying consolidated statements of operations.

The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1 ).

ACCOUNTING STANDARDS UPDATES

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Anticipated Adoption Periods

Effect on the financial statements or other significant matters

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

Improvements to Reportable Segment Disclosures

This pronouncement is intended to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analysis.

Q4 2024 (fiscal year) Q1 2025 (interim period)

We are currently evaluating the impact adopting this standard will have on our Consolidated Financial Statements.

Effect on Consolidated Financial Statements

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

Improvements to Income Tax Disclosures

The amendments in this update improve the transparency, effectiveness, and comparability of income tax disclosures by requiring ( 1 ) consistent categories and greater disaggregation by jurisdiction.

The amendments allow investors to better assess, in their capital allocation decisions, how an entity's worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows.

We are currently evaluating the impact adopting this standard will have on our Consolidated Financial Statements.

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

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

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

Q4 2025 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 consolidated financial statements.

ASU 2024 - 03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ):

Disaggregation of Income Statement Expenses This pronouncement requires expanded disclosures on comprehensive income to improve expenses and address requests from investors for more detailed information about the types of expenses.

Q4 2027 (fiscal year) Q1 2028 (interim period) The Company is still assessing the impact of the new accounting standard on its consolidated financial statements.

Accounting Standards Adopted in Current Year

Effect on the financial statements or other significant matters

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

The pronouncement seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the incurred loss impairment methodology in current U.S.

GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

We adopted this standard in Q1 2023 and it did not have a material impact on our financial statements.

BUSINESS ACQUISITION

The Performance and Lifestyle Footwear Business of Honeywell International Inc.

On January 24, 2021, we entered into a Purchase Agreement (the "Purchase Agreement") with certain subsidiaries of Honeywell International Inc.

(collectively, "Honeywell"), to purchase Honeywell's performance and lifestyle footwear business, including brand names, trademarks, assets and liabilities associated with Honeywell's performance and lifestyle footwear business (the "Acquisition") for an aggregate, adjusted purchase price of $ 212 million.

On March 15, 2021 ( the "Acquisition Date"), pursuant to the terms and conditions set forth in the Purchase Agreement, we completed the Acquisition for an aggregate preliminary closing price of approximately $ 207 million, net of cash acquired, based on preliminary working capital and other adjustments.

Upon a final agreement of net working capital as of the Acquisition Date, we owed Honeywell an additional $ 5.4 million.

The Acquisition was funded through cash on hand and borrowings under two new credit facilities.

See Note 10 for information regarding the two credit facilities.

The Acquisition expanded our brand portfolio to include Muck, XTRATUF, Servus, Ranger and NEOS brands (the "Acquired Brands").

We acquired 100 % of the voting interests of certain subsidiaries and additional assets comprising the performance and lifestyle footwear business of Honeywell with the Acquisition.

On March 30, 2023, we completed the sale of the Servus brand and the related assets.

See Note 4 for additional information.

On September 30, 2022, we completed the sale of the NEOS brand and the related assets.

See Note 5 for additional information.

Through the Acquisition, we have greatly enhanced our powerful portfolio of footwear brands and significantly increased our sales and profitability.

We acquired a well-run business with a corporate culture and a customer base similar to ours, which provides meaningful growth opportunities within our existing product categories as well as an entry into new market segments.

Its innovative and authentic product collections complement our existing offering with minimal overlap, which we believe will allow us to strengthen our wholesale relationships and serve a wider consumer audience.

At the same time, we plan to leverage our existing advanced fulfillment capabilities to improve distribution of the Acquired Brands to wholesale customers and accelerate direct-to-consumer penetration.

In connection with the Acquisition, we also entered into employment agreements with seven key employees from the performance and lifestyle footwear business of Honeywell, pursuant to which, among other things, we agreed to grant 25,000 non-qualified stock options in the aggregate to the seven employees as an inducement for continuing their employment with us.

We acquired multiple leases through the Acquisition including the lease of our Rock Island and China manufacturing facilities and an office building lease in Westwood, Massachusetts.

We closed the Rock Island manufacturing Facility in September 2023 and we closed the office in Westwood, Massachusetts in December 2022.

The Acquisition contributed net sales of $ 161.9 million, $ 242.8 million, and $ 179.0 million to our consolidated operating results for the years ended December 31, 2023, 2022 and 2021, respectively.

The Acquisition contributed net income of $ 16.4 million, $ 9.3 million, and $ 16.5 million to our consolidated operating results for the years ended December 31, 2023, 2022 and 2021, respectively.

Acquisition-related costs

Costs incurred to complete and integrate the Acquisition are expensed as incurred and included in "operating expenses" in the accompanying consolidated statements of operations.

During the years ended December 31, 2023, 2022, and 2021 there were approximately $ 2.8 million, $ 3.5 million and $ 11.9 million, respectively, of Acquisition-related costs recognized.

These costs represent investment banking fees, legal and professional fees, transaction fees, integration costs, amortization and consulting fees associated with the Acquisition.

Purchase Price Allocation

The Acquisition has been accounted for under the business combinations accounting guidance.

As a result, we have applied acquisition accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the Acquisition Date.

The aggregate closing price noted above was allocated to the major categories of assets acquired and liabilities assumed based on their fair values at the Acquisition Date using primarily Level 2 and Level 3 inputs.

These Level 2 and Level 3 valuation inputs include an estimate of future cash flows and discount rates.

Additionally, estimated fair values are based, in part, upon outside valuation for certain assets, including specifically identified intangible assets.

The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill was as follows:

($ in thousands)

Accounts receivable (1)

Inventories (2)

Property, plant and equipment

Intangible assets

Accounts payable

Accrued expenses

Total identifiable net assets

Cash acquired

Total cash paid, net of cash acquired

( 1 ) The recorded amount for accounts receivable considers expected uncollectible amounts of approximately $ 0.6 million in its determination of fair value.

( 2 ) Fair value of finished goods inventories included step up value of approximately $ 3.5 million, all of which was expensed during the twelve months ended December 31, 2021, and is included in "Cost of Goods Sold" in the accompanying consolidated statement of operations.

( 3 ) Goodwill largely consists of the acquired workforce, expected costs synergies and economies of scale resulting from the Acquisition.

Unaudited Pro Forma Financial Information

The following unaudited pro forma results of operations assume that the Acquisition occurred at the beginning of the periods presented.

These unaudited pro forma results are presented for information purposes only and are not necessarily indicative of what the results of operations would have been if the Acquisition had occurred at the beginning of the periods presented, nor are they indicative of the future results of operations.

The pro forma results presented below are adjusted for the removal of the step up value of finished goods inventory associated with the Acquisition of approximately $ 3.5 million for the year ended December 31, 2021.

The pro forma results presented below are also adjusted for the removal of Acquisition-related costs of approximately $ 2.8 million, $ 3.5 million and $ 11.9 million for the twelve months ended December 31, 2023, 2022 and 2021, respectively.

Year Ended December 31,

($ in thousands, except per share amount)

Diluted earnings per share

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

Improvements to Reportable Segment Disclosures

This pronouncement requires expanded disclosures about an entity’s reportable segments, including more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how an entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources.

The Company has included all required disclosures within its Form 10 -K for the year ended December 31, 2024.

See Note 19 for further information on segment disclosures.

SALE OF SERVUS BRAND AND RELATED ASSETS

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(collectively "the Buyer").

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

The remaining $ 1.7 million will be paid out in accordance with the purchase agreement.

The sale of the Servus brand included the sale of inventory, fixed assets, customer relationships, tradenames and goodwill, 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 consolidated statement of operations for the twelve months ended December 31, 2023.

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

Total consideration for this transaction was approximately $ 19.0 million and resulted in a gain on sale of approximately $ 1.3 million which is recorded within Interest Expense and Other - net on the accompanying consolidated statement of operations for the twelve months ended December 31, 2023.

SALE OF NEOS BRAND AND RELATED ASSETS

On September 30, 2022, we completed the sale of the NEOS brand and related assets to certain entities controlled by SureWerx pursuant to terms of an asset purchase agreement dated September 30, 2022.

Total consideration for this transaction was approximately $ 5.8 million, of which $ 5.5 million was received at closing.

The remaining $ 0.3 million was deposited in escrow and shall be managed and paid out in accordance with the terms of the asset purchase agreement and the escrow agreement.

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

This transaction resulted in the sale of inventory of approximately $ 3.6 million recorded in net sales and approximately $ 2.4 million recorded in costs of goods sold in the accompanying consolidated statement of operations for the twelve months ended December 31,

Fixed assets, customer relationships and tradenames sold in connection with the sale of the NEOS brand resulted in reduction of operating expenses of approximately $ 0.7 million recorded in the accompanying consolidated statement of operations for the twelve months ended December 31,

Total consideration for this transaction was approximately $ 5.8 million and resulted in the sale of inventory of approximately $ 3.6 million recorded in net sales and approximately $ 2.4 million recorded in costs of goods sold in the accompanying consolidated statement of operations for the twelve months ended December 31, 2022.

The sale of fixed assets, customer relationships and tradenames resulted in a reduction of operating expenses of approximately $ 0.7 million recorded in the accompanying consolidated statement of operations for the twelve months ended December 31, 2022.

Inventories are comprised of the following:

($ in thousands)

Finished goods

$ 149,328 $ 151,515

Raw materials

16,671 16,774

Work-in-process

Finished goods

In accordance with ASC 606, the returns reserve included within inve ntories was approximatel y $ 0.8 million and $ 1.1 million at December 31, 2023 and December 31, 2022 , respectively.

$ 166,701 $ 169,201

The asset associated with our returns reserve included within inve ntories was approximatel y $ 0.9 million and $ 0.8 million at December 31, 2024 and December 31, 2023 , respectively.

PROPERTY, PLANT, AND EQUIPMENT

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Machinery and equipment

Furniture and fixtures

$ 61,956 $ 61,148

37,657 37,581

Lasts, dies and patterns

Construction work-in-progress

11,806 11,271

Furniture and fixtures

Less - accumulated depreciation

( 75,242 ) ( 69,455 )

37,725 42,551

Construction work-in-progress

Net Fixed Assets

$ 49,666 $ 51,976

We incurred approximately $ 7.5 million, $ 8.1 million and $ 9.2 million in depreciation expense for 2024 , 2023 and 2022 , respectively.

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When performing the income approach, we utilize the present value of cash flows to estimate fair value.

The future cash flows for our reporting units were projected based on our estimates, at that time, of future revenues, operating income, and other factors (such as working capital and capital expenditures).

The future cash flows for our reporting units were projected based on our estimates, at that time, of future revenues, EBITDA, and other factors (such as working capital and capital expenditures).

The discount rates used were based on a weighted-average cost of capital determined from relevant market comparisons and take into consideration the risk and nature of the respective reporting unit's cash flows.

1 unchanged sentence

To further confirm fair value, we compare the aggregate fair value of our reporting units to our total market capitalization.

The fair value of our trade names was determined based on the income approach using the Relief from Royalty Method.

After completing our annual goodwill impairment test for our Wholesale and Retail reporting units during the fourth quarter of 2024 and 2023, we concluded there was no impairment in either of these years.

The fair value of our indefinite-lived intangibles, which consist of trademarks, was determined based on the income approach using the relief from royalty method.

This method requires us to estimate the future revenues for the related brands, the appropriate royalty rate, and the weighted-average cost of capital.

We consider the assumptions used in our determination of the estimated fair value of our reporting units and indefinite-lived intangible assets to be reasonable and comparable to those that would be used by other marketplace participants;

In the fourth quarter of 2024, after completing our annual impairment test for our indefinite-lived intangible assets, we recognized a $ 4.0 million impairment charge related to the Muck trademark.

The impairment charge for the Muck trademark was due to a reduction in the assigned royalty rate as a result of changes in projected revenue growth.

There was no impairment charge for indefinite-lived intangible assets recorded during the year end December 31, 2023.

however, actual events and results could differ substantially from the estimates used in our valuations.

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Estimates utilized in the projected cash flows include consideration of macroeconomic conditions, expected growth rates, cost containment and margin expansion, business plans, market position, and the discount rate applied to the cash flows.

Unanticipated market or macroeconomic events and circumstances such as supply chain disruptions and the loss of key customers could negatively affect key assumptions used for the recent fair value test and potentially result in goodwill impairment.

After completing our annual impairment test for each reporting unit and our indefinite-lived intangible assets during the fourth quarter of 2023 and 2022, we concluded there was no impairment in either of these years.

We did not have any reporting units that were at risk of failing the first step of the goodwill impairment test.

The estimated fair values of the Wholesale and the Retail reporting unit exceeded their carrying amounts at the date of testing by more than 20 % for both 2023 and 2022.

The amount of our goodwill that is deductible for tax purposes is $ 47.0 million.

The changes in the carrying amount of goodwill are as follows:

5 unchanged sentences

$ 47,844 $ 47,844

( 1 ) Relates to the divesture of the Servus brand during the year ended December 31, 2023, see Note 4 for additional information.

( 2 ) As of December 31, 2023, goodwill allocated to our Wholesale and Retail reporting segments was $ 23.0 million and $ 24.8 million, respectively.

As of December 31, 2022, goodwill allocated to our Wholesale and Retail reporting segments was $ 25.4 million and $ 24.8 million, respectively.

( 1 ) As of December 31, 2024 and December 31, 2023 , goodwill allocated to our Wholesale and Retail report ing segments was $ 23.0 million and $ 24.8 million, respectively.

No goodwill was allocated to our Contract Manufacturing segment for either period presented.

( 2 ) Relates to the divesture of the Servus brand during the year ended December 31, 2023, Note 3 - Sale of Servus Brand and Related Assets for additional information.

A schedule of identified intangible assets is as follows:

($ in thousands)

December 31, 2024

($ in thousands)

Indefinite-lived intangible assets

Trademarks (1)

$ 78,654 $ ( 4,000 ) 74,654

Intangible assets subject to amortization

895 $ ( 863 ) - 32

Customer relationships

41,659 ( 10,522 ) - 31,137

Total Intangibles

Total Intangible assets other than goodwill

$ 121,208 $ ( 11,385 ) $ ( 4,000 ) $ 105,823

( 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 ).

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

($ in thousands)

( 1 ) As of December 31, 2024 , the Trademark impairment related to our Wholesale and Retail report ing segments was $ 3.6 million and $ 0.4 million, respectively.

December 31, 2023

Trademarks (1)

($ in thousands)

Indefinite-lived intangible assets

$ 78,654 $ 78,654

Customer relationships (2)

Intangible assets subject to amortization

895 $ ( 845 ) 50

Total Intangibles

Customer relationships

41,659 ( 7,745 ) 33,914

( 1 ) NEOS trademarks were reduced from approximately

$0.6 million to

2022 as a result of the sale of the NEOS bran

( 2 ) Customer relationships relating to the NEOS brand of approximately

$ 0.9 million and related amortization of approximately

$ 0.1 million were reduced to

2022 as a result of the sale of the NEOS br

and (see Note

The weighted average remaining life for our patents is 6.0 years.

A schedule of approximate amortization expense related to finite-lived intangible assets for the twelve months ended December 31, 2023 , 2022 and 2021 is as follows:

Twelve Months Ended

($ in thousands)

Amortization expense

Total Intangible assets other than goodwill

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

The weighted average life of patents and customer relationships is 3.1 years and 11.3 years, respectively.

Amortization expense for intangible assets subject to amortization for the twelve months ended December 31, 2024, 2023 and 2022 was $ 2.8 million, $ 2.9 million and $ 3.1 million, respectively.

A schedule of approximate expected remaining amortization expense related to finite-lived intangible assets for the years ending December 31 is as follows:

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Long-term deposits

Deferred loan fees

NQDC plan assets

$ 1,498 $ 965

ACCRUED EXPENSES AND OTHER LIABILITIES

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

($ in thousands)

Accrued Expenses and other liabilities:

Accrued duties

$ 6,807 $ 5,440

Accrued freight

Salaries and wages

Operating lease liability

Returns liability

Accrued advertising

Taxes - other

Income taxes payable

Accrued interest

Total accrued expenses and other liabilities

$ 23,977 $ 18,112

LONG-TERM DEBT

On March 15, 2021, we entered into a senior secured term loan facility ("Term Facility") with TCW Asset Management Company, LLC, as agent, for the lenders party thereto in the amount of $ 130 million.

The Term Facility provided for quarterly payments of principal and bears interest of LIBOR plus 7.00 % through June 30, 2021.

After this date, interest was assessed quarterly based on our total leverage ratio.

The total leverage ratio is calculated as (a) Total Debt to (b) EBITDA.

If our total leverage ratio is greater than or equal to 4.00, the effective interest rate will be SOFR plus 7.50 % (or at our option, Prime Rate plus 6.50 %).

If our total leverage ratio is less than 4.00, but greater than 3.00, the effective interest rate will be SOFR plus 7.00 % (or at our option, Prime Rate plus 6.00 %).

If our total leverage ratio is less than 3.00, the effective interest rate will be SOFR plus 6.50 % (or at our option, Prime Rate plus 5.50 %).

The Term Facility also has a SOFR floor rate of 1.00 %.

In June 2022, we entered into a second amendment with TCW to amend our Term Facility to consent to modifications in our borrowing capacity under the ABL Facility as described below, and to adjust certain pricing and prepayment terms, among other things.

The second amendment also modified the interest index whereas SOFR will be used to calculate interest rather than LIBOR.

The effective interest rate was increased to SOFR plus 7.50 % through November 2022.

In November 2022, the Term Facility was amended to increase the effective interest rate to LIBOR plus 7.00 % until June 2023 and to provide certain EBITDA adjustments with response to financial covenants, among other things.

In May 2023, we entered into a fourth amendment with TCW to further amend our Term Facility to provide certain EBITDA adjustments in respect of the financial covenants, adjust the method to calculate total debt, continue certain pricing terms, extend certain prepayment terms, and pay such lenders certain amendment fees, among other things.

In October 2023, we entered into a sixth amendment with TCW to further amend our Term Facility to provide certain EBITDA adjustments with respect to the financial covenants, adjust the performance pricing grid, and adjust the total leverage ratio periodically through June 30, 2025, among other things.

Our Term Facility is collateralized by a

second -lien on accounts receivable, inventory, cash and related assets, and a

first -lien on substantially all other assets.

The Term Facility matures on

March 15, 2026.

On March 15, 2021, we also entered into a senior secured asset-based credit facility ("ABL Facility") with Bank of America, N.A.

("Bank of America") as agent, for the lenders party thereto.

The ABL Facility provides a new senior secured asset-based revolving credit facility up to a principal amount of $ 150 million, which includes a sub-limit for the issuance of letters of credit up to $ 5 million.

The ABL Facility may be increased up to an additional $ 50 million at the Borrowers’ request and the Lenders’ option, subject to customary conditions.

In December of 2021, we amended our ABL Facility to temporarily increase our borrowing capacity from $ 150 million to $ 175 million until June 2022, at which time our borrowing capacity would have went down to $ 165 million.

In June 2022, we further amended our ABL Facility to temporarily increase our borrowing capacity by $ 25 million to $ 200 million through December 31, 2022, which thereafter would have been reduced to $ 175 million .

In November 2022, we entered into a third amendment to our ABL Facility to provide certain EBITDA adjustments with respect to our financial covenant.

On April 26, 2024, we refinanced our existing debt by amending and restating our credit agreement with Bank of America, N.A., as agent, sole lead arranger and sole bookrunner and other lenders party thereto (the "ABL Agreement").

The ABL Agreement consists of a $ 175.0 million asset-based lending credit facility (the "ABL Facility") and a $ 50.0 million term loan facility (the "Term Facility").

The ABL Agreement is collateralized by a first -lien on substantially all of the Company's domestic assets.

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.

In October 2023, we entered into a fifth amendment to our ABL Facility to provide certain EBITDA adjustments with respect to our financial covenant.

As of December 31, 2023, we had borrowing capacity of $ 31.1 million.

As of December 31, 2024, we had borrowing capacity of $ 55.9 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 Consolidated Statements of Operations, consisting of a $ 1.1 million loss on term loan extinguishment and a $ 1.5 million term loan prepayment penalty for the twelve months ended December 31, 2024.

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 Consolidated Statements of Cash Flows for the twelve months ended December 31, 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:

Revolver Pricing Level (1)

Average Availability as a Percentage of Commitments

Term SOFR Term Loan

Base Rate Term Loan

Term SOFR Revolver Loan

Base Rate Revolver Loan

Term SOFR FILO Loan

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 %

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 as of December 31, 2024:

($ in thousands)

Term Facility that matures in 2029 with an effective interest rate of 10.47 %

ABL Facility that matures in 2029:

SOFR borrowings with an effective interest rate of 6.24 %

Prime borrowings with an effective interest rate of 7.77 %

Unamortized debt issuance costs

Total debt, net of debt issuance costs

Debt maturing within one year

Long-term debt

A schedule of debt payments for t he next five years is as follows:

($ in thousands)

Credit Facility Covenants

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

As of December 31, 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 December 31, 2024, the Company was in compliance with the amounts paid on dividends in accordance with our debt facilities.

Interest expense was approximately $ 17.0 million, $ 22.7 million and $ 18.3 million, respectively, for the years ended December 31, 2024, 2023 and 2022 .

The ABL Facility is collateralized by first -lien on accounts receivable, inventory, cash and related assets and a second -lien on substantially all other assets.

The ABL Facility matures on March 15, 2026.

Interest on the ABL Facility is based on the amount available to be borrowed as set forth on the following chart:

Retired Term Debt

On March 15, 2021, we entered into a senior secured term loan facility with TCW Asset Management Company, LLC ("TCW"), as agent, for the lenders party thereto in the amount of $ 130.0 million (the "TCW Term Facility").

The TCW Term Facility provided for quarterly payments of principal and bore interest of LIBOR plus 7.00 % through June 30, 2021.

After that date, interest was assessed quarterly based on our total leverage ratio.

The total leverage ratio was calculated as (a) Total Debt to (b) EBITDA.

If our total leverage ratio was greater than or equal to 4.00, the effective interest rate would have been SOFR plus 7.75 % (or at our option, Prime Rate plus 6.75 %).

If our total leverage ratio was less than 4.00 but greater than or equal to 3.50, the effective interest rate would have been SOFR plus 7.50 % (or at our option, Prime Rate plus 6.50 %).

If our total leverage ratio was less than 3.50 but greater than 3.00, the effective interest rate would have been SOFR plus 7.00 % (or at our option, Prime Rate plus 6.00 %).

If our total leverage ratio was less than 3.00, the effective interest rate would have been SOFR plus 6.50 % (or at our option, Prime Rate plus 5.50 %).

The TCW Term Facility also had a SOFR floor rate of 1.00 %.

In June 2022, we entered into a second amendment with TCW to further amend the TCW Term Facility to consent to the modifications in our borrowing capacity under the Original ABL Facility as described below, and to adjust certain pricing and prepayment terms, among other things.

The second amendment also modified the interest index to provide the use of SOFR to calculate interest rather than LIBOR.

The effective interest rate was increased to SOFR plus 7.50 % through November 2022.

In November 2022, the TCW Term Facility was amended to increase the effective interest rate to SOFR plus 7.00 % until June 2023 and to provide certain EBITDA adjustments with respect to financial covenants, among other things.

In May 2023, we entered into a fourth amendment to the TCW Term Facility to provide certain EBITDA adjustments in respect of the financial covenants, adjust the method to calculate total debt, continue certain pricing terms, extend certain prepayment terms, and pay such lenders certain amendment fees, among other things.

In October 2023, we entered into a sixth amendment to the TCW Term Facility to provide certain EBITDA adjustments in respect of the financial covenants, adjust the performance pricing grid, adjust the total leverage ratio periodically through June 30, 2025, among other things.

The TCW Term Facility was collateralized by a second -lien on accounts receivable, inventory, cash and related assets, and a first -lien on substantially all other assets.

The TCW Term Facility was replaced by the Term Facility that was part of the ABL Agreement in April 2024.

On March 15, 2021, we also entered into a senior secured asset-based credit facility (the "Original ABL Facility") with Bank of America, N.A.

as agent, for the lenders party thereto.

The Original ABL Facility provided a senior secured asset-based revolving credit facility up to a principal amount of $ 150.0 million, which included a sub-limit for the issuance of letters of credit up to $ 5.0 million.

The Original ABL Facility would be increased up to an additional $ 50.0 million at the borrowers’ request and the lenders’ option, subject to customary conditions.

In June 2022, we further amended the Original ABL Facility to temporarily increase our borrowing capacity to $ 200.0 million through December 31, 2022, which thereafter was reduced to $ 175.0 million.

In November 2022, we entered into a third amendment to the Original ABL Facility to provide certain EBITDA adjustments with respect to our financial covenant.

The Original ABL Facility included a separate first in, last out (FILO) tranche, which allowed us to borrow at higher advance rates on eligible accounts receivables and inventory balances.

In October 2023, we entered into a fifth amendment to the Original ABL Facility to provide certain EBITDA adjustments with respect to our financial covenant.

The Original ABL Facility was collateralized by a first -lien on accounts receivable, inventory, cash and related assets and a second -lien on substantially all other assets.

The Original ABL Facility was replaced with the ABL Facility that was part of the ABL Agreement in April 2024.

Interest on the Original ABL Facility was based on the amount available to be borrowed as set forth on the following chart:

Revolver Pricing Level

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0.25 % 1.75 % 0.75 % 2.25 %

( 1 ) Tier II applied until June 30, 2021.

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

In addition, the ABL Facility requires us to pay an annual collateral management fee in the amount of $ 75,000 due on each anniversary of the ABL Facility issuance date, until it matures.

Current and long-term debt consisted of the following:

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.

In addition, the Original ABL Facility required us to pay an annual collateral management fee in the amount of $ 75,000 due on each anniversary of the issuance date, until it matured.

Current and long-term debt under the Original ABL Facility and TCW Ter m Facility consisted of the following as of December 31, 2023:

($ in thousands)

Term Facility that matures in 2026 with an effective interest rate of 13.20 % and 12.14 % as of December 31, 2023 and December 31, 2022, respectively

$ 77,932 $ 116,332

ABL Facility that matures in 2026:

SOFR borrowings with an effective interest rate of 7.31 % and 5.47 % as of December 31, 2023 and December 31, 2022, respectively

83,144 140,000

Prime borrowings with an effective interest rate of 8.75 % and 7.27 % as of December 31, 2023 and December 31, 2022, respectively

175,014 259,633

TCW Term Facility refinanced in April 2024 with an effective interest rate of 13.20 %

Original ABL Facility amended and restated in April 2024:

SOFR borrowings with an effective interest rate of 7.31 %

Prime borrowings with an effective interest rate of 8.75 %

Unamortized debt issuance costs

( 1,884 ) ( 2,737 )

Total debt, net of debt issuance costs

173,130 256,896

Debt maturing within one year

( 2,650 ) ( 3,250 )

Long-term debt

Retired Credit Facility Covenants

The TCW Term Facility contained restrictive covenants which required us to maintain a maximum total leverage ratio and a minimum fixed charge coverage ratio, as defined in the TCW Term Facility agreement.

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 twelve months ended December 31, 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 following is a summary of the Company's lease cost:

($ in thousands)

Operating lease cost

$ 2,896 $ 4,019 $ 3,175

Credit Facility Covenants

The Term Facility contains restrictive covenants which require us to maintain a maximum total leverage ratio and a minimum fixed charge coverage ratio, as defined in the agreement.

We are in compliance with all Term Facility covenants as of December 31, 2023 .

Our ABL Facility contains a restrictive covenant which requires us to maintain a fixed charge coverage ratio upon a triggering event taking place (as defined in the ABL Facility agreement).

During the twelve months ended December 31, 2023 , there were no triggering events and the covenant was not in effect.

The operating ROU assets and operating lease liabilities as of December 31, 2023 and December 31, 2022 were as follows:

Short-term lease cost

1,205 504 2,166

Total lease cost

$ 4,101 $ 4,523 $ 5,341

Variable lease costs for the year ending December 31, 2024 was approximately $ 0.4 million.

The following is a summary of the Company's su pplemental cash flow information related to leases:

($ in thousands)

Financial Statement Line Item

Operating ROU Assets

Leased assets

Other accrued expenses

Long-term lease

Total leased liabilities

Maturities of our operating lease liabilities are as follows:

Cash paid for operating lease liabilities

$ 2,921 $ 2,853 $ 1,492

Operating lease assets obtained in exchange for lease liabilities

$ 869 $ 628 $ 2,786

The weighted-average discount rate for operating leases as of December 31, 2024 is 3.2 %.

The weighted-average remaining lease term for operating leases as of December 31, 2024 is 2.4 years.

Future undiscounted cash flows for operating leases for the fiscal periods subsequent to December 31, 2024 are as follows:

($ in thousands)

1 unchanged sentence

Present value of lease liabilities

For the twelve months ended December 31, 2023 and December 31, 2022 , the weighted average remaining lease term and discount rate were as follows:

Weighted-average remaining lease term (years)

Operating leases

Weighted-average discount rate

Operating leases

For the twelve months ended December 31, 2023 , December 31, 2022 and December 31, 2021 the supplemental cash flow information was as follows:

($ in thousands)

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

Right-of-use assets obtained in exchange for lease obligations

Operating leases

The breakdown of rent expense for our operating leases for the twelve months ended December 31, 2023 and December 31, 2022 were as follows:

Twelve Months Ended

($ in thousands)

Financial Statement Line Item

Operating lease expenses - Manufacturing & Sourcing (1)

Cost of goods sold

Operating lease expenses (1)

Operating expenses

Total lease expenses

( 1 ) Includes short-term lease expenses of approximately $ 0.5 million, $ 2.2 million and $ 1.3 million for the twelve months ended December 31, 2023 , December 31, 2022 and December 31, 2021 , respectively.

We sponsor a 401 (k) savings plan for eligible employees.

We provide a contribution of 3 % of applicable salary to the plan for all employees with greater than six months of service.

Additionally, we match eligible employee contributions at a rate of 0.25 %, per one percent of applicable salary contributed to the plan by the employee.

We provide a contribution of 3.0 % of applicable salary to the plan for all eligible full-time employees with greater than six months of service.

Additionally, we match eligible employee contributions at a rate of 25.0 % up to the first 4.0 % of eligible compensation that is deferred.

This matching contribution will be made by us up to a maximum of 1.0 % of the employee’s applicable salary for all qualified employees.

2 unchanged sentences

401k plan sponsor contributions

$ 1,392 $ 1,531 $ 1,798

Deferred Compensation Plans

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The assets held by the trust were approximately $ 0.5 million and $ 0.4 million as of December 31, 2024 and December 31, 2023 , respectively, and are classified as trading securities within other assets in the accompanying consolidated balance sheets.

The liabilities held under the Executive Deferred Compensation Plan were approximately $ 0.2 million and $ 0.1 million, as of December 31, 2023 and December 31, 2022 , respectively, and are classified within deferred liabilities in the accompanying consolidated balance sheets.

The liabilities held under the Executive Deferred Compensation Plan were approximately $ 0.2 million as of December 31, 2024 and December 31, 2023 , and are classified within deferred liabilities in the accompanying consolidated balance sheets.

Changes in the deferred compensation assets and liabilities are charged to operating expenses in the accompanying consolidated statements of operations.

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The total liabilities held under the Dominican Plan were approximately $ 0.4 million and $ 0.3 million as of December 31, 2024 and December 31, 2023 , respectively, and are classified within deferred liabilities in the accompanying consolidated balance sheets.

We account for income taxes in accordance with the accounting standard for "Income Taxes," which requires an asset and liability approach to financial accounting and reporting for income taxes.

Accordingly, deferred income taxes have been provided for the temporary differences between the financial reporting and the income tax basis of the Company’s assets and liabilities by applying enacted statutory tax rates applicable to future years to the basis differences.

We use the asset and liability method of accounting for income taxes based on ASC 740, Accounting for Income Taxes .

Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the period in which the differences are expected to reverse Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the asset will not be realized.

A breakdown of our income tax expense (benefit) for the years ended December 31 is as follows:

($ in thousands)

$ ( 926 ) $ 3,877 $ 5,993

2,337 ( 977 ) ( 1,417 )

Total federal

1,411 2,900 4,576

State & local:

140 262 1,415

148 123 ( 247 )

Total state & local

288 385 1,168

94 337 ( 623 )

Total foreign

972 443 ( 441 )

$ 2,671 $ 3,728 $ 5,303

A reconciliation of recorded federal income tax expense to the expected expense computed by applying the applicable federal statutory rate for all periods to income before income taxes follows:

2 unchanged sentences

Expected expense at statutory rate

$ 2,947 $ 2,975 $ 5,414

Increase (decrease) in income taxes resulting from:

Exempt income from Dominican Republic operations due to tax holiday

Tax Rate Differential effect of Foreign Operations

Tax on repatriated earnings from Dominican Republic operations

Tax on repatriated earnings from foreign operations

State and local income taxes

Tax rate differential effect of foreign operations

Permanent differences

Change in valuation allowance

( 200 ) 355 -

Provision to return filing adjustments and other

( 117 ) 329 ( 352 )

Foreign tax credit

Meals and entertainment

Nondeductible penalties

Provision to return filing adjustments

( 468 ) ( 227 ) ( 348 )

Exempt income from Dominican Republic operations due to tax holiday

( 512 ) ( 476 ) ( 632 )

$ 2,671 $ 3,728 $ 5,303

Deferred income taxes recorded in the Consolidated Balance Sheets at December 31, 2024 and 2023 consisted of the following:

1 unchanged sentence

Deferred tax assets:

$ 3,640 $ 2,428

Asset valuation allowances and accrued expenses

State and local income taxes

Pension and deferred compensation

Transaction costs

Net operating losses

163(J) Interest limitation

State and local income taxes

Pension and deferred compensation

Total deferred tax assets

Valuation allowances

( 155 ) ( 355 )

Total deferred tax assets

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Intangible assets

11,908 11,713

Lease liabilities

Tollgate tax on Lifestyle earnings

State and local income taxes

Lease Liability

Total deferred tax liabilities

17,177 18,921

Net deferred tax liability

$ 10,044 $ 7,475

The valuation allowance as of December 31, 2024 is related to certain foreign income tax net operating loss carry forwards.

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SHAREHOLDERS' EQUITY

Repurchase of Common Stock

Our previous shareholder repurchase program expired on March 4, 2022.

We have not announced a new repurchase program since the prior program expired.

Preferred Shares

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The 2014 Plan includes 1,100,000 of our common shares that may be granted under various types of awards as described in the 2014 Plan.

As of December 31, 2023 , we were authoriz ed to issue 502,325 shares und er the 2014 Plan.

On January 24, 2021, we adopted the 2021 Inducement Option Plan (the "2021 Plan") pursuant to which 25,000 non-qualified stock options were granted to seven key employees acquired with the Acquisition.

The 2021 Plan did not require shareholder approval under Nasdaq Listing Rule 5635 (c).

As of December 31, 2023 , no shares were available for grant under the 2021 Plan.

As of December 31, 2023, we were authorized to issue 502,325 shares under the 2014 Plan.

On June 5, 2024, our shareholders approved the 2024 Omnibus Incentive Plan.

The purpose of the 2024 Plan was to authorize shares to be available for grant upon expiration of the 2014 Plan and to make other design changes based on recent corporate governance and other trends.

We carried over 472,862 shares that remained available under the 2014 Plan and our shareholders authorized an additional 27,138 shares for the 2024 Plan for a total of 500,000 shares eligible for grant under the 2024 Plan.

As of December 31, 2024, we were authorized to issue 504,267 shares under the 2024 Plan.

During the years ended December 31, 2024 and 2023 , and 2022 we issued 19,364 shares, 34,418 shares and 10,762 shares of common stock to members of our Board of Directors, respectively.

Stock Options

There were no options granted for the year ended December 31, 2023.

The following table presents the weighted average assumptions used in the option-pricing model at the grant date for options granted during the years ended December 31:

There were no options granted for the year ended December 31, 2024 and 2023.

The following table presents the weighted average assumptions used in the option-pricing model at the grant date for options granted during the year ended December 31:

Risk-free interest rate

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Share-based compensation expense

$ 1,294 $ 1,244 $ 1,230

The following summarizes stock option activity for the year ended December 31, 2024 :

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Options outstanding at January 1, 2024

265,086 $ 38.92

( 21,700 ) 27.62

Forfeited or expired

( 43,686 ) 32.59

Options outstanding at December 31, 2024

199,700 $ 28.82 10.7 $ 256,226

Expected to vest

34,700 $ 33.95 14.2 $ -

Exercisable at December 31, 2024

165,000 $ 27.74 9.9 $ 256,226

For the years ended December 31, 2024, 2023 and 2022 , cash received for the exercise of stock options was approximately $ 0.6 million, $ 1.0 million, and $ 0.5 million, respectively.

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Nonvested at January 1, 2024

32,412 $ 23.49

( 651 ) 12.79

( 3,018 ) 26.50

Nonvested at December 31, 2024

53,423 $ 26.54

As of December 31, 2024 , the total unrecognized compensation cost related to non-vested stock options and restricted stock units was approxi mately $ 1.0 million with a weighted-average expense recogniti on period of 1.6 years.

During the years ended December 31, 2023 and 2022 , and 2021 we issued 34,418 shares, 10,762 shares and 6,868 shares of common stock to members of our Board of Directors, respectively.

EARNINGS PER SHARE

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Basic - weighted average shares outstanding

7,437 7,363 7,317

Dilutive restricted share units

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Diluted - weighted average shares outstanding

7,480 7,381 7,369

Anti-dilutive securities

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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, and internationally, mainly in Europe.

Our Wholesale channels vary by product line and include sporting goods stores, outdoor specialty stores, online retailers, independent retailers, mass merchants, retail uniform stores and specialty safety shoe stores.

Our Retail business includes direct sales of our products to consumers through our e-commerce websites, our Rocky Outdoor Gear Store, and Lehigh business.

We also sell footwear under the Rocky Brands label to the U.S.

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., the 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 Judgements

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied;

this generally occurs upon shipment of our product to our customer, which is when the transfer of control of our product passes to the customer.

The duration of our arrangements with our customers are typically one year or less.

Revenues from sales are recorded at the net sales price, which includes estimates of variable consideration for which reserves are established.

Components of variable consideration include prompt payment discounts, volume rebates and product returns.

These reserves, as detailed below, are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer).

The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period.

Our analyses also contemplated application of the constraint in accordance with the guidance, under which it determined a material reversal of revenue would not occur in a future period for the estimates as of December 31, 2023 .

Revenue is recognized when the performance obligations under the terms of a contract with our customer are satisfied.

The performance obligation is satisfied, and revenue is recorded when control passes to the customer which is generally upon shipment to the customer or at the time of sale for our retail store customers.

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, 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 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.

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.

When a customer has a right to a prompt payment discount, we estimate the likelihood that the customer will earn the discount using historical data and adjust our estimate when the estimate of the likelihood that a customer will earn the discount changes or the consideration becomes fixed, whichever occurs earlier.

The estimated amount of variable consideration is recognized as a credit to trade receivables and a reduction in revenue until the uncertainty of the variable consideration is alleviated.

Because most of our customers have payment terms less than six months there is not a significant financing component in our contracts with customers.

When a customer is offered a rebate on purchases retroactively, this is accounted for as variable consideration because the consideration for the current and past purchases is not fixed until it is known if the discount is earned.

We estimate the expected discount the customer will earn at contract inception using historical data and projections and update our estimates when projections materially change or consideration becomes fixed.

The estimated rebate is recognized as a credit to trade receivables and offset against revenue until the rebate is earned or the earning period has lapsed.

When a right of return is part of the arrangement with the customer, we estimate the expected returns based on an analysis using historical data.

We adjust our estimate either when the most likely amount of consideration we expect to receive changes or when the consideration becomes fixed, whichever occurs earlier.

Please see Note 1 and Note 6 for additional information.

Trade receivables represent our right to unconditional payment that only relies on the passage of time.

Contract receivables represent contractual minimum payments required under non-cancellable contracts with the U.S.

Our estimated sales returns are based on historical customer return data and known or anticipated returns not yet received from customers.

Actual returns in any future period are inherently uncertain and thus may differ from estimates recorded.

If actual or expected future returns are significantly higher or lower than the established reserves, a reduction or increase to net revenues is recorded in the period in which the determination is made.

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.

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.

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.

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

As of December 31, 2024, there are no contract receivable or contract liability balances outstanding.

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 continue to be 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 in included in operating expenses.

This treatment is consistent with how we accounted for these costs in prior periods.

Costs associated with obtaining a contract are expensed as incurred in accordance with the practical expedient in ASC 340 - 40 in instances where the amortization period is one year or less.

We anticipate substantially all costs incurred to obtain a contract would be subject to this practical expedient.

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.

All shipping costs billed to customers have been included in net sales.

Contract Liabilities

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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.

Because all revenues are recognized at a point in time and are disaggregated by channel, our segment disclosures are consistent with ASC 606 disaggregation requirements.

See Note 19 for segment disclosures.

All revenues are recogniz ed at a point in time when control of our products pass to the customer at point of shipment or point of sale for retail store 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 19 - Segment Information for segment disclosures.

SUPPLEMENTAL CASH FLOW INFORMATION

3 unchanged sentences

Interest paid

$ 16,170 $ 13,302 $ 17,501

Federal, state, and local income taxes paid, net

Change in contract receivables, net

Change in contract liabilities, net

$ ( 1,912 ) $ 6,656 $ 1,930

Property, plant, and equipment purchases in accounts payable

$ 484 $ 881 $ 976

SEGMENT INFORMATION

1 unchanged sentence

Wholesale, Retail and Contract Manufacturing.

In our Wholesale segment, our products are offered in over 10,000 retail locations representing a wide range of distribution channels in the U.S., Canada, U.K.

In our Wholesale segment, our products are offered in over 10,000 retail locations representing a wide range of distribution channels in the U.S., U.K.

and other international markets, mainly in Europe.

5 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.

Our Chief Operating Decision Maker ("CODM") is our Chief Executive Officer (CEO), who evaluates operating results and performance based on net sales and gross margin.

Our CODM also uses results of net sales and gross margin to evaluate segment performance and allocate resources as the primary metrics for overall segment evaluation.

Operating expenses such as warehousing, distribution, marketing and other key activities supporting our operations are integrated to maximize efficiency and productivity;

therefore, we do not include these expenses within our segment results, but instead review them at the consolidated level.

The following is a summary of segment results for the Wholesale, Retail, and Contract Manufacturing segments for the years ended December 31:

($ in thousands)

$ 313,340 $ 337,019 $ 484,779

126,868 116,960 115,354

Contract Manufacturing

13,564 7,854 15,342

Total Net Sales

$ 453,772 $ 461,833 $ 615,475

COST OF GOODS SOLD:

$ 196,095 $ 217,534 $ 319,720

66,715 58,569 57,537

Contract Manufacturing

11,952 7,132 12,999

Total Cost of Goods Sold

$ 274,762 $ 283,235 $ 390,256

GROSS MARGIN:

$ 117,245 $ 119,485 $ 165,059

60,153 58,391 57,817

Contract Manufacturing

1,612 722 2,343

Total Gross Margin

$ 179,010 $ 178,598 $ 225,219

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

Product Group Information - The following is supplemental information on net sales by product group for the years ended

Product Line Information - The following is supplemental information on net sales by product line for the years ended December 31:

($ in thousands)

Work footwear

$ 190,349 41.9 % $ 198,096 42.9 % $ 256,162 41.6 %

Outdoor footwear

130,222 28.7 130,424 28.2 183,121 29.8

82,639 18.2 70,374 15.2 108,697 17.7

Duty and commercial military footwear

34,547 7.6 50,482 10.9 46,177 7.5

Military footwear

11,275 2.5 7,999 1.7 15,342 2.5

4,740 1.0 4,458 1.0 5,976 1.0

$ 453,772 100.0 % $ 461,833 100.0 % $ 615,475 100.0 %

Net sales to foreign countries represented approximately 3.2 % of net sales in 2024 , 5.1 % of net sales in 2023 and 6.2 % of net sales in 2022 .

The net book value of fixed assets located outside of the U.S.

$ 11.9 million at

December 31, 2024

, of which approx

imately $ 3.9 mill ion resides in the Dominican Republic and approximatel

y $ 8.0 mil lion resides in China.

RESTRUCTURING CHARGES

In 2023 , we completed a cost savings review aimed at operating efficiencies to better position us for profitable growth.

Following the integration of the Acquired Brands, we identified a number of operational synergies and cost savings opportunities, including a reduction in workforce.

In addition to the accrued expenses below, we incurred approximately $ 1.5 million in restructuring costs that are included in operating expenses in the accompanying consolidated statements of operations for the year ended December 31, 2023 .

For the year ended

2023 , the following activity was recorded:

Employee Severance, Benefits and Related Costs

Twelve Months Ended December 31,

($ in thousands)

Accrued expenses, beginning of period

Restructuring charges

Cash payments

Accrued expenses, end of period

imately $ 3.7 mill

ion resides in the Dominican Republic and approximatel

lion resides in China.

COMMITMENTS AND CONTINGENCIES

We are, from time to time, a party to litigation which arises in the normal course of business.

Although the ultimate resolution of pending proceedings cannot be determined, in the opinion of management, the resolution of such proceedings in the aggregate will not have a material adverse effect on our financial position, results of operations, or liquidity.

We are currently party to litigation with a manufacturing supplier of the Acquired Brands.

While it is not possible to predict the outcome of this litigation with certainty, we do not anticipate the resolution will have a material, adverse impact on our financial position.

We believe that the likelihood of the resolution being materially adverse to our financial statements is remote and as such have not recorded any contingent liabilities within the accompanying Consolidated Financial Statements.

In addition, we have not recorded any potential favorable resolution to the litigation due in accordance with ASC 450 - 30, Gain Contingencies.

The Company is involved in legal proceedings in the ordinary course of business.

Unless otherwise stated, we believe that the likelihood of the resolution being materially adverse to our financial statements is remote and as such have not recorded any contingent liabilities within the accompanying Consolidated Financial Statements.

Gain Contingency

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Customs) on certain products imported into the U.S.

associated with the Acquired Brands during 2021 and 2022.

during 2021 and 2022.

As a result of the misclassification of HTS codes we have paid duties in excess of the required amount.

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Customs to seek refunds of duties paid in excess of the correct HTS codes.

We have the potential to recover the total amount of overpaid duties resulting in a potential refund of approximately $ 7.7 million, of which we have received $ 1.9 million in refunds during the year ended December 31, 2023 and $ 3.2 million in refunds during the year ended December 31, 2022.

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.

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

No refunds were received for the twelve months ended December 31, 2024, $ 1.9 million was received during the year ended December 31, 2023 and $ 3.2 million was received during the year ended December 31, 2022.

We are accounting for these post summary corrections as a gain contingency, and as such have not recorded these potential refunds within the accompanying consolidated balance sheet due to uncertainty of collection.

Refunds received will be recognized as a reduction to the cost of goods sold when, and if, the refunds are received.

SUBSEQUENT EVENTS

Repurchase of Common Stock

On February 24, 2025, Rocky Brands announced that its Board of Directors has approved a new share repurchase program of up to $ 7,500,000 of the Company’s outstanding common stock, no par value per share.

This repurchase program replaces the previous repurchase program authorized by the Board of Directors that expired on March 4, 2022.

Dividends Declared

On February 18, 2025, Rocky Brands announced that its board of directors declared a quarterly cash dividend of $ 0.155 per share of outstanding common stock, to be paid on March 17, 2025 to all shareholders of record as of the close of business on March 3, 2025.

The declaration and payment of future dividends and the establishment of future record dates and payment dates are subject to the quarterly determination of the board of directors.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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-K

Item 8. Financial Statements and Supplementary Data