What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 116 added, 105 removed, 134 unchanged (62% of the section changed)

8 unchanged sentences

Accordingly, average inventory levels have been highest during the second and third quarters of each year and sales have been highest in the last two quarters of the year.

During the first six months of 2025, we began to implement strategic sourcing shifts to leverage our own manufacturing facilities in the Dominican Republic and Puerto Rico.

This strategic shift in sourcing and manufacturing was aimed to help mitigate potential adverse business impacts stemming from additional tariffs imposed during 2025.

In addition to these sourcing shifts, we have accelerated our inventory purchases in 2025 prior to the implementation of these additional tariffs, in an effort to mitigate the adverse potential business impact.

Our business is subject to a highly evolving and everchanging macroeconomic environment, including changes in tariffs, taxes and industry changes.

In 2025, the U.S.

government announced significant additional tariffs on products imported from various countries, including those countries where we primarily source our products.

To help mitigate the potential adverse business impacts these additional tariffs may have on our business, we began to implement sourcing shifts to leverage our own manufacturing facilities in the Dominican Republic and Puerto Rico.

Over the last twelve months, we have seen a shift in our total mix of sales, as the growth or our Retail segment outpaces the growth in our Wholesale and Contract Manufacturing segments.

1 unchanged sentence

Additionally, there has been an uptick in sales on our owned e-commerce websites and third-party marketplaces as we put an emphasis on digital marketing and as spending among consumers continues to shift to online retailers.

During the second quarter of 2025, we experienced an increase in net sales over the second quarter of 2024.

This increase was attributable to an increase in Wholesale and Retail net sales, partially offset by a decrease in Contract Manufacturing net sales.

Overall gross margin improved over the past year, driven by an increase in Wholesale segment gross margin and the continued acceleration of growth in our Retail segment, which as noted above grew at a faster rate than our Wholesale and Contract Manufacturing segments.

The increase in Wholesale gross margin as a percentage of net sales compared to the prior year period was largely due to favorable shifts in product mix, manufacturing efficiencies and strategic sourcing shifts.

The favorable shift in product mix is largely attributed to an on-going shift in our branded net sales mix, with our rubber-boot brands delivering stronger growth relative to the rest of the brands under our portfolio.

Our operating expenses as a percentage of net sales increased for the three and six months ending June 30, 2025 compared to the three and six months ending June 30, 2024 due to the increase in Retail sales as well as an increase in marketing investments.

Sales under our Retail segment are generally subject to higher selling and outbound logistics costs relative to those costs incurred under our Wholesale and Contract Manufacturing segments.

In addition to the increased costs associated with Retail sales, we made incremental investments in traditional and digital marketing during the three and six months ended June 30, 2025 to drive sales growth.

Interest expense declined for the three and six months ending June 30, 2025 compared to the same periods in 2024, due to lower interest rates following the refinancing of our debt in April 2024.

Additionally, continued debt repayments over the past twelve months have reduced the overall outstanding principal balances, further contributing to the decrease in interest expense.

The increase in inventory as of June 30, 2025 compared to June 30, 2024 was a strategic move to place ourselves in a better inventory position for the latter half of 2025 and to accelerate inventory purchases before new tariffs were put in place.

SECOND QUARTER 2025 FINANCIAL HIGHLIGHTS COMPARED TO SECOND QUARTER 2024

During the third quarter of 2025, we experienced an increase in net sales over the third quarter of 2024.

This increase was attributable to an increase in net sales across all three of our reportable segments, Wholesale, Retail and Contact Manufacturing.

Overall gross margin improved over the past year, driven by an increase in both our Wholesale segment gross margin and our Retail segment gross margin.

The increase in Wholesale gross margin as a percentage of net sales compared to the prior year period was largely due to favorable shifts in product mix and price increases.

The favorable shift in product mix was largely attributed to an on-going shift in our branded net sales mix, with our rubber-boot brands delivering stronger growth relative to the rest of the brands in our portfolio.

The increase in Retail segment gross margin was largely driven by price increases during the third quarter of 2025.

Our operating expenses as a percentage of net sales increased for the three and nine months ending September 30, 2025 compared to the three and nine months ending September 30, 2024 due to an increase in outbound logistics costs, an increase in Retail sales, as well as an increase in marketing investments.

Sales under our Retail segment are generally subject to higher selling costs relative to those costs incurred under our Wholesale and Contract Manufacturing segments.

In addition to the increased costs associated with Retail sales, we made incremental investments in traditional and digital marketing during the three and nine months ended September 30, 2025 to drive sales growth.

Interest expense declined for the three and nine months ending September 30, 2025 compared to the same periods in 2024 due to continued debt repayments over the past twelve months, which have reduced the overall outstanding principal balances, as well as a decrease in interest rates.

The increase in inventory as of September 30, 2025 compared to September 30, 2024 was primarily due to an increase in cost of inventory as a result of the tariffs imposed in 2025.

THIRD QUARTER 2025 FINANCIAL HIGHLIGHTS COMPARED TO THIRD QUARTER 2024

Net sales increased 7.0% to $122.5 million

Gross margin increased 210-basis points to 40.2%

Inventory increased 6.8% to $186.8 million

Inventories increased 12.7% to $193.6 million

Total debt decreased 7.5% to $139.0 million

FIRST HALF OF 2025 FINANCIAL HIGHLIGHTS COMPARED TO FIRST HALF OF 2024

YEAR TO DATE 2025 FINANCIAL HIGHLIGHTS COMPARED TO YEAR TO DATE 2024

Net sales increased 5.1% to $342.3 million

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

($ in thousands)

2 unchanged sentences

Income from operations

Net sales increased to $105.6 million in the second quarter of 2025 compared to $98.3 million in the second quarter of 2024.

The increase in net sales in the current year quarter compared to the prior year quarter was due to an increase in both our Wholesale and Retail reporting segments, partially offset by a decrease in our Contract Manufacturing reporting segment.

Gross margin in the second quarter of 2025 was $43.3 million, or 41.0% of net sales, compared to $38.0 million, or 38.7% of net sales, in the second quarter of 2024.

The increase in gross margin as a percentage of net sales was attributed to an increase in Wholesale gross margins as well as a higher percentage of Retail net sales, which carry higher gross margins than our Wholesale and Contract Manufacturing segments.

Operating expenses for the second quarter of 2025 were $36.1 million, or 34.2% of net sales, compared to $33.5 million, or 34.1% of net sales, for the first quarter of 2024.

The increase in operating expenses as a percentage of net sales was due to higher selling costs associated with the increase in Retail sales as well as incremental investments in marketing.

Income from operations for the second quarter of 2025 was $7.2 million, or 6.8% of net sales, compared to $4.5 million, or 4.6% of net sales, in the year ago period.

The increase in income from operations was primarily driven by the increase in gross margin for the three months ended June 30, 2025, compared to the year ago period.

Net sales for the six months ended June 30, 2025 increased to $219.7 million compared to $211.2 million for the six months ended June 30, 2024.

The increase in net sales was due to an increase in Retail segment net sales for the six months ended June 30, 2025 compared to the prior year period, partially offset by a decrease in Wholesale and Contract Manufacturing net sales.

Gross margin in the second half of 2025 and 2024 was $90.3 million, or 41.1% of net sales and $82.1 million, or 38.9% of net sales, respectively.

Net sales increased to $122.5 million in the third quarter of 2025 compared to $114.6 million in the third quarter of 2024.

The increase in net sales in the current year quarter compared to the prior year quarter was due to an increase in net sales across all of our reportable segments:

Wholesale, Retail and Contract Manufacturing.

Gross margin in the third quarter of 2025 was $49.3 million, or 40.2% of net sales, compared to $43.6 million, or 38.1% of net sales, in the third quarter of 2024.

The increase in gross margin as a percentage of net sales was attributed to price increases and a favorable shift in product mix, fueled by an on-going shift in our branded net sales mix with our rubber-boot brands delivering stronger growth relative to the rest of the brands in our portfolio.

Operating expenses for the third quarter of 2025 were $37.5 million, or 30.6% of net sales, compared to $33.6 million, or 29.3% of net sales, for the third quarter of 2024.

The increase in operating expenses as a percentage of net sales was due to higher outbound logistics costs along with higher selling costs associated with the increase in Retail sales, and incremental investments in marketing.

Income from operations for the third quarter of 2025 was $11.7 million, or 9.6% of net sales, compared to $10.1 million, or 8.8% of net sales, in the year ago period.

The increase in income from operations was primarily driven by the increase in gross margin for the three months ended September 30, 2025, compared to the year ago period.

Net sales for the nine months ended September 30, 2025 increased to $342.3 million compared to $325.7 million for the nine months ended September 30, 2024.

The increase in net sales was due to an increase in Retail segment net sales for the nine months ended September 30, 2025 compared to the prior year period, partially offset by a decrease in Wholesale and Contract Manufacturing net sales.

Year-to-date gross margin for 2025 and 2024 was $139.6 million, or 40.8% of net sales, and $125.8 million, or 38.6% of net sales, respectively.

The increase in gross margin as a percentage of net sales was attributable to increased Wholesale segment gross margins as well as an increase in Retail net sales which carry higher gross margins than the Wholesale and Contract Manufacturing segments.

Operating expenses for the six months ended June 30, 2025 were $74.4 million, or 33.9% of net sales, compared to $69.7 million, or 33.0% of net sales for the six months ended June 30, 2024.

The increase in operating expenses as a percentage of net sales during the six months ended June 30, 2025 compared to the year ago period was largely attributable to an increase in selling and logistics costs associated with an increase in Retail sales as well as an increase in digital marketing.

Income from operations for the six months ended June 30, 2025 was $15.9 million, or 7.2% of net sales, compared to $12.5 million, or 5.9% of net sales, for the same period a year ago.

Operating expenses for the nine months ended September 30, 2025 were $112.0 million, or 32.7% of net sales, compared to $103.3 million, or 31.7% of net sales, for the nine months ended September 30, 2024.

The increase in operating expenses as a percentage of net sales during the nine months ended September 30, 2025 compared to the year ago period was largely attributable to an increase in selling and logistics costs associated with an increase in Retail sales as well as an increase in digital marketing.

Income from operations for the nine months ended September 30, 2025 was $27.6 million, or 8.1% of net sales, compared to $22.6 million, or 6.9% of net sales, for the same period a year ago.

The increase in income from operations was primarily driven by an increase in gross margin in the current year period.

Three Months Ended June 30, 2025 compared to Three Months Ended June 30, 2024

Three Months Ended September 30, 2025 compared to Three Months Ended September 30, 2024

Three Months Ended

September 30,

($ in thousands)

1 unchanged sentence

Total Net Sales

Wholesale net sales for the three months ended June 30, 2025 were $73.1 million compared to $68.3 million for the three months ended June 30, 2024.

The increase in Wholesale net sales was due to increased demand across several key styles and brands, supported by favorable weather conditions and a stronger inventory position throughout the second quarter of 2025.

Wholesale net sales for the three months ended September 30, 2025 were $89.1 million compared to $84.0 million for the three months ended September 30, 2024.

The increase in Wholesale net sales was due to increased demand across several key styles and brands coupled with a tariff related price increase.

Additionally, as part of a strategic initiative, we continued to build upon the lifestyle component of our outdoor category to broaden our distribution and consumer reach.

Retail net sales for the three months ended June 30, 2025 were $29.7 million compared to $26.1 million for the three months ended June 30, 2024.

The increase was attributed to an increase in our Lehigh CustomFit business, third-party marketplace net sales, and our own e-commerce website net sales.

The increase in our Lehigh CustomFit business was attributed to a realignment of our sales organization in the first quarter of 2024, which allowed us to expand our customer base, positioning Lehigh for long-term growth starting in the latter half of 2024.

Consumer spending among Lehigh CustomFit customers has also increased with improved subsidy utilization and an increase in average subsidy dollars in the second quarter of 2025 compared to the second quarter of 2024.

Retail net sales for the three months ended September 30, 2025 were $29.5 million compared to $26.8 million for the three months ended September 30, 2024.

The increase was attributed to an increase in our Lehigh CustomFit business and third-party marketplace net sales.

We experienced an increase in our Lehigh CustomFit business as we continue to make operational improvements to our CustomFit website and increase product offerings.

Additionally, consumer spending among Lehigh CustomFit customers has continued to increase with improved subsidy utilization in the third quarter of 2025 compared to the third quarter of 2024.

These factors have largely offset supply chain and tariff pressures.

The increase in third-party marketplace platforms was attributed to increased presence within the marketplace space and more competitive pricing.

The increase in our e-commerce websites in the second quarter of 2025 compared to the year ago period was due to increased promotions and more competitive pricing on certain products as we continue to optimize our inventory position.

Contract Manufacturing net sales for the three months ended June 30, 2025 were $2.8 million compared to $3.9 million for the three months ended June 30, 2024.

The decrease in Contract Manufacturing net sales was mainly attributed to no new U.S.

Military contracts in 2025 as well as a decrease in contract manufacturing net sales.

The increase in third-party marketplace platforms was attributed to increased presence within the marketplace space as well as price increases.

Contract Manufacturing net sales for the three months ended September 30, 2025 were $3.9 million compared to $3.8 million for the three months ended September 30, 2024.

The increase in Contract Manufacturing net sales was mainly attributed to an increase in private label sales as no additional contracts were awarded from the U.S.

Military in the current year.

Three Months Ended

September 30,

($ in thousands)

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Total Margin $'s

Wholesale gross margin for the three months ended June 30, 2025 was $29.5 m illion, or 40.3% of net sales, compared to $25.4 million, or 37.3% of net sales, for the three months ended June 30, 2024.

The higher Wholesale gross margin in the second quarter of 2025 compared to the second quarter 2024 was attributable to a more favorable product mix, manufacturing efficiencies, and strategic sourcing shifts in the second quarter of 2025 compared to the prior year period.

Retail gross margin for the three months ended June 30, 2025 was $13.5 million, or 45.2% of net sales, compared to $12.2 million, or 46.9% of net sales, for the three months ended June 30, 2024 .

The decrease in Retail gross margin as a percentage of net sales was attri butable to Lehigh representing a larger portion of total Retail sales, which carry a lower margin than our e-commerce and third-party marketplace sales.

The decrease in Retail margin can also be attributed to a decrease in margin on our e-commerce and third-party marketplace platforms, driven by increased promotional activity and more competitive pricing as we continued to optimize our inventory position.

Contract Manufacturing gross margin for the three months ended June 30, 2025 was $0.3 million, or 12.4% of net sales, compared to $0.4 million, or 9.6% of net sales, for the three months ended June 30, 2024 .

The increase in Contract Manufacturing gross margin was driven by fewer contract manufacturing sales, which are typically at a lower margin than our U.S.

Military sales.

Who lesale gross margin for the three months ended September 30, 2025 was $35.2 million, or 39.5% of net sales, compared to $31.5 million, or 37.5% of net sales, for the three months ended September 30, 2024 .

The higher Wholesale gross margin in the third quarter of 2025 compared to the third quarter 2024 was attributable to a more favorable product mix an d price increases in the third quarter of 2025 compared to the prior year period.

Retail gross margin for the three months ended September 30, 2025 was $13.8 million, or 46.8% of net sales, compared to $11.7 million, or 43.6% of net sales, for the three months ended September 30, 2024.

The increase in Retail gross margin as a percentage of net sales was attributable to our third-party marketplace sales and e-commerce sales, which carry higher margins than our Lehigh CustomFit sales as well as price increases in the third quarter of 2025.

Contract Manufacturing gross margin for the three months ended September 30, 2025 was $0.3 million, or 6.9% of net sales, compared to $0.4 million, or 12.0% of net sales, for the three months ended September 30, 2024 .

The decrease in gross margin was driven by reduced economies of scale at our Puerto Rico manufacturing facility.

Three Months Ended

September 30,

($ in thousands)

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% of Net Sales

Operating expenses for the three months ended June 30, 2025 were $36.1 million, or 34.2% of net sales, compared to $33.5 million, or 34.1% of net sales, for the three months ended June 30, 2024.

The increase in operating expenses as a percentage of net sales was due to increases in selling costs associated with a higher volume of Retail sales in the current year period as well as incremental marketing investments.

Operating expenses for the three months ended September 30, 2025 were $37.5 million, or 30.6% of net sales, compared to $33.6 million, or 29.3% of net sales, for the three months ended September 30, 2024.

The increase in operating expenses as a percentage of net sales was due to increases in outbound logistics costs and selling costs associated with a higher volume of Retail sales in the current year period as well as incremental marketing investments.

Three Months Ended

September 30,

($ in thousands)

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Interest expense

Other (income) expense, net

Other income, net

Total Interest Expense and Other

Interest Expense and Other - net for the three months ended June 30, 2025 was $2.5 million compared to $6.1 million in the year ago period.

The decrease in interest expense was largely due to a $2.6 million loan extinguishment charge in the second quarter of 2024 associated with a prepayment penalty and accelerated amortization of deferred financing fees in connection with paying off our previous term debt.

The remaining $1.0 million decrease in interest expense in the second quarter of 2025 compared to the prior year period was due to a decrease in interest rates resulting from our debt refinance that occurred in April 2024 as well as lower debt levels.

Interest Expense and Other - net for the three months ended September 30, 2025 was $2.5 million compared to $3.2 million in the year ago period.

The decrease in interest expense was due to lower debt levels as well as a decrease in interest rates.

Three Months Ended

September 30,

($ in thousands)

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Effective Tax Rate

The decrease in our effective tax rate in the second quarter of 2025 compared to the same year ago period was due to changes in our projected income generated from our international business.

Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024

Six Months Ended

The decrease in our effective tax rate in the third quarter of 2025 compared to the year ago period was primarily due to the mix of earnings between the United States and our international subsidiaries.

Nine Months Ended September 30, 2025 compared to Nine Months Ended September 30, 2024

Nine Months Ended

September 30,

($ in thousands)

1 unchanged sentence

Total Net Sales

Wholesale net sales for the six months ended June 30, 2025 were $147.9 million compared to $148.1 million for the six months ended June 30, 2024.

The decrease in Wholesale net sales, was due to a blanket commercial military order that elevated sales in the first quarter of 2024.

This decrease was partially offset by increased demand in select key styles, driven by favorable weather and the continued expansion of the lifestyle component within our outdoor category in the second quarter of 2025 compared to the second quarter of 2024.

Retail net sales for the six months ended June 30, 2025 were $66.4 million compared to $56.5 million for the six months ended June 30, 2024.

The increase in Retail net sales for the first six months of 2025 was partially due to increased sales in our Lehigh CustomFit platform.

Wholesale net sales for the nine months ended September 30, 2025 were $237.0 million compared to $232.1 million for the nine months ended September 30, 2024.

The increase in Wholesale net sales was due to increased demand across several key styles and brands.

Additionally, as part of a strategic initiative, we continued to build upon the lifestyle component of our outdoor category to broaden our distribution and consumer reach.

Retail net sales for the nine months ended September 30, 2025 were $95.9 million compared to $83.3 million for the nine months ended September 30, 2024.

The increase in Retail net sales for the first nine months of 2025 was due to increased sales in our Lehigh CustomFit business, third-party marketplace net sales, and our own e-commerce website net sales.

Consumer spending among Lehigh CustomFit customers has also increased with improved subsidy utilization and an increase in average subsidy dollars in the first half of 2025 compared to the first half of 2024.

We also experienced an increase in sales through third-party marketplace platforms and owned e-commerce websites in the first six months of 2025 compared to the year ago period due to increased promotions and more competitive pricing on certain products as we continue to optimize our inventory position.

Contract Manufacturing net sales for the six months ended June 30, 2025 and 2024 were $5.5 million and $6.6 million, respectively.

The decrease in sales during the current year period was due to no new contracts awarded with the U.S.

Military and a decrease in our Contract Manufacturing sales.

Six Months Ended

Consumer spending among Lehigh CustomFit customers has also increased with improved subsidy utilization and an increase in average subsidy dollars in the first nine months of 2025 compared to the year ago period.

We also experienced an increase in sales through third-party marketplace platforms and owned e-commerce websites in the first nine months of 2025 compared to the year ago period due to increased promotions and more competitive pricing on certain products as we continue to optimize our inventory position.

Contract Manufacturing net sales for the nine months ended September 30, 2025 and 2024 were $9.4 million and $10.3 million, respectively.

The decrease in sales during the current year period was due to no new contracts awarded from the U.S.

Military in 2025, partially offset by an increase in private label net sales.

Nine Months Ended

September 30,

($ in thousands)

4 unchanged sentences

Total Margin $'s

Wholesale gross margin for the six months ended June 30, 2025 was $59.6 million of 40.3% of net sales, compared to $54.5 million, or 36.8% of net sales, for the six months ended June 30, 2024.

The higher Wholesale gross margin in the first half of 2025 compared to the first half of 2024 was attributable to a more favorable product mix, manufacturing efficiencies, and strategic sourcing shifts in the first quarter of 2025 compared to the prior year period as well as the blanket commercial military order in the prior year period that elevated sales but carried a lower gross margin compared to other Wholesale sales.

Retail gross margin for the six months ended June 30, 2025 was $30.2 million, or 45.5% of net sales, compared to $27.0 million, or 47.8% of net sales, for the six months ended June 30, 2024.

The decrease in gross margin as a percentage of net sales was attributable to a decrease in margin on our e-commerce and third-party marketplace platforms, driven by increased promotional activity and more competitive pricing as we continued to optimize our inventory position.

Contract Manufacturing gross margin for the six months ended June 30, 2025 was $0.5 million, or 9.2% of net sales, compared to $0.7 million, or 10.4% of net sales, for the six months ended June 30, 2024 .

Wholesale gross margin for the nine months ended September 30, 2025 was $94.8 million or 40.0% of net sales, compared to $86.0 million, or 37.0% of net sales, for the nine months ended September 30, 2024.

The higher Wholesale gross margin in the first nine months of 2025 compared to the first nine months of 2024 was attributable to a more favorable product mix as well as the blanket commercial military order in the prior year period that elevated sales but carried a lower gross margin compared to other Wholesale sales.

The favorable shift in product mix was largely attributed to an on-going shift in our branded net sales mix, with our rubber boot brands delivering stronger growth relative to the rest of the brands in our portfolio.

Retail gross margin for the nine months ended September 30, 2025 was $44.0 million, or 45.9% of net sales, compared to $38.7 million, or 46.5% of net sales, for the nine months ended September 30, 2024.

The decrease in gross margin as a percentage of net sales was attributable to a decrease in margin on our third-party marketplace platforms, driven by increased promotional activity and more competitive pricing as we continued to optimize our inventory position during the first half of 2025 prior to our price increase going into effect in the third quarter of 2025.

Contract Manufacturing gross margin for the nine months ended September 30, 2025 was $0.8 million, or 8.2% of net sales, compared to $1.1 million, or 11.0% of net sales, for the nine months ended September 30, 2024 .

The decrease in gross margin was driven by reduced economies of scale at our Puerto Rico manufacturing facility.

Six Months Ended

Nine Months Ended

September 30,

($ in thousands)

5 unchanged sentences

% of Net Sales

Operating expenses for the six months ended June 30, 2025 were $74.4 million, or 33.9% of net sales, compared to $69.7 million, or 33.0% of net sales, for the six months ended June 30, 2024.

The increase in operating expenses as a percentage of net sales was due to increases in selling and outbound logistics costs associated with a higher volume of Retail sales in the current year period as well as an increase in marketing investments.

Six Months Ended

Nine Months Ended

September 30,

($ in thousands)

3 unchanged sentences

Total Interest Expense and Other

Interest Expense and Other - net for the six months ended June 30, 2025 was $4.9 million compared to $10.8 million in the year ago period.

Interest Expense and Other - net for the nine months ended September 30, 2025 was $7.4 million compared to $14.0 million in the year ago period.

The decrease in interest expense was partially due to a $2.6 million loan extinguishment charge during the first six months of 2024 associated with a prepayment penalty and accelerated amortization of deferred financing fees in connection with paying off our previous term debt.

The remaining decrease in interest expense is due to lower interest rates resulting from our debt refinance that occurred April 2024 as well as lower debt levels.

Six Months Ended

The remaining decrease in interest expense was due to lower interest rates resulting from our debt refinance that occurred April 2024 as well as lower debt levels.

Nine Months Ended

September 30,

($ in thousands)

2 unchanged sentences

Effective Tax Rate

The decrease in our effective tax rate in the first six months of 2025 compared to the same year ago period was due to changes in our projected income generated from our international businesses.

The decrease in our effective tax rate in the first nine months of 2025 to 22.1% from 23.4% in the year ago period was primarily due to the mix of earnings between the United States and our international subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

We believe that we have sufficient liquidity to support our ongoing operations and to re-invest in our business to drive future growth.

As of June 30, 2025, we maintained cash and cash equivalen ts of $2.8 million and had $45.7 m illion of availability under our ABL Facility.

As of September 30, 2025, we maintained cash and cash equivalen ts of $3.3 million and had $40.1 m illion of availability under our ABL Facility.

Our primary ongoing operating cash flow requirements are for inventory purchases and other working capital needs, capital expenditures and payments on our credit facilities.

3 unchanged sentences

however, we have the ability to borrow on our ABL Facility as needed and, as such, its balance may fluctuate significantly throughout any given year.

In addition to our ABL Facility with outstanding borrowings of $103.6 million as of June 30, 2025, we also have a Term Facility with outstanding borrowings of $30.9 million as of June 30, 2025.

In addition to our ABL Facility with outstanding borrowings of $112.1 million as of September 30, 2025, we also have a Term Facility with outstanding borrowings of $28.9 million as of September 30, 2025.

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

Additionally, the ABL Facility and Term Facility contain restrictions on the amount of dividend payments and the amount of share repurchases of common stock.

As of June 30, 2025, we were in compliance with such covenants and restrictions under the ABL Facility and Term Facility.

As of September 30, 2025, we were in compliance with such covenants and restrictions under the ABL Facility and Term Facility.

We may utilize portions of our excess cash to prepay certain amounts of long-term debt prior to maturity.

1 unchanged sentence

We lease certain machinery, equipment, and manufacturing facilities under operating leases that generally provide for renewal options.

As of June 30, 2025, our material cash requirements from known contractual obligations and commitments relate primarily to our long-term debt and operating leases commitments.

As of September 30, 2025, our material cash requirements from known contractual obligations and commitments relate primarily to our long-term debt and operating leases commitments.

See Note 8 - Long-Term Debt to the Unaudited Condensed Consolidated Financial Statement for more information.

Based on our current expectations and forecasts of future earnings, we believe our cash generated from operations will provide sufficient liquidity to fund our operations and debt and lease obligations for the next twelve months and beyond.

Six Months Ended

Nine Months Ended

September 30,

($ in millions)

4 unchanged sentences

Operating Activities.

Net cash provided by operating activities for the six months ended June 30, 2025 and 2024 was $2.0 million and $23.9 million, respectively.

Adjusting for noncash items, net income provided a cash in-flow of $16.3 million and $10.5 million for the six months ended June 30, 2025 and 2024 , respectively.

The net change in working capital and other assets and liabilities resulted in cash used by operating activities of $14.2 million for the six months ended June 30, 2025 , compared to an increase in cash provided by operating activities of $13.4 million for the six months ended June 30, 2024 .

An increase in inventory resulted in a use of cash of $20.1 million and $5.8 million for the six months ended June 30, 2025 and 2024, respectively.

The increase in cash used to purchase inventory was a result of the additional tariffs imposed during 2025 as well as increased purchases in order to meet estimated demand in the second half of the year.

A decrease in accounts receivable resulted in a source of cash of $6.1 million and $13.1 million for the six months ended June 30, 2025 and 2024, respectively.

The change in cash provided by accounts receivable was due to an increase in sales for the second quarter of 2025 compared to the prior year period.

Net cash used in operating activities for the nine months ended September 30, 2025 was $1.3 million and cash provided by operating activities for the nine months ended September 30, 2024 was $28.4 million.

Adjusting for noncash items, net income provided a cash in-flow of $27.4 million and $20.0 million for the nine months ended September 30, 2025 and 2024 , respectively.

The net change in working capital and other assets and liabilities resulted in cash used by operating activities of $28.7 million for the nine months ended September 30, 2025 , compared to an increase in cash provided by operating activities of $8.3 million for the nine months ended September 30, 2024 .

An increase in inventory resulted in a use of cash of $26.9 million and $2.6 million for the nine months ended September 30, 2025 and 2024, respectively.

The increase in cash used to purchase inventory was a result of the additional tariffs imposed during 2025 as well as increased purchases in order to meet estimated demand for the fourth quarter of 2025.

An increase in accounts receivable resulted in a use of cash of $10.2 million and $1.2 million for the nine months ended September 30, 2025 and 2024, respectively.

The change in cash used in accounts receivable was due to an increase in sales in the third quarter of 2025 over the prior year end when compared to the third quarter of 2024.

Investing Activities.

Net cash used in investing activities for the six months ended June 30, 2025 and 2024 was $3.9 million and $0.4 million, respectively.

We invested $3.9 million and $2.1 million in capital expenditures for our manufacturing operations and information technology during the six months ended June 30, 2025 and 2024, respectively.

The use of cash for the six months ended June 30, 2024 was offset by proceeds from the sale of the Servus brand, totaling $1.7 million.

Net cash used in investing activities for the nine months ended September 30, 2025 and 2024 was $5.7 million and $1.5 million, respectively.

We invested $5.7 million and $3.2 million in capital expenditures for our manufacturing operations and information technology during the nine months ended September 30, 2025 and 2024, respectively.

The use of cash for the nine months ended September 30, 2024 was offset by proceeds from the sale of the Servus brand, totaling $1.7 million.

Financing Activities.

Net cash provided by financing activities for the six months ended June 30, 2025 was $0.9 million compared to $23.8 million in net cash used in financing activities for the six months ended June 30, 2024.

The current year net source of cash primarily related to proceeds from our revolving facility offset by payments on our term loan and dividend payments.

The net use of cash for the six months ended June 30, 2024 primarily related to payments on our revolving facility and term loan.

Net cash provided by financing activities for the nine months ended September 30, 2025 was $6.6 million compared to $27.7 million in net cash used in financing activities for the nine months ended September 30, 2024.

The current year net source of cash primarily related to proceeds from our revolving credit facility offset by payments on our term loan and dividend payments.

The net use of cash for the nine months ended September 30, 2024 primarily related to payments on our revolving credit facility and term loan offset by proceeds from our revolving credit facility and term loan.

On February 25, 2025, we announced a share repurchase program of up to $7,500,000 of the Company's outstanding common stock, no par value per share.

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Words such as “believe,” “anticipate,” “expect,” “will,” “may,” “should,” “intend,” “plan,” “estimate,” “predict,” “potential,” “continue,” “likely,” “would,” “could” and similar expressions are intended to identify forward-looking statements.

Investors are cautioned that forward-looking statements involve risk and uncertainties including, without limitations, dependence on sales forecasts, changes in consumer demand, seasonality, impact of weather, competition, reliance on suppliers, risks inherent to international trade, changing retail trends, the loss or disruption of our manufacturing and distribution operations, cybersecurity breaches or disruption of our digital systems, fluctuations in foreign currency exchange rates, economic changes, as well as other factors set forth under the caption “Item 1A, Risk Factors” in our Annual Report on Form 10- K for the year ended December 31, 2024 (filed March 17, 2025) and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 (filed May 8, 2025), and other factors detailed from time to time in our filings with the Securities and Exchange Commission.

Investors are cautioned that forward-looking statements involve risk and uncertainties including, without limitations, dependence on sales forecasts, changes in consumer demand, seasonality, impact of weather, competition, reliance on suppliers, risks inherent to international trade, increases or changes in duties and tariffs in countries of import and export, changing retail trends, the loss or disruption of our manufacturing and distribution operations, cybersecurity breaches or disruption of our digital systems, fluctuations in foreign currency exchange rates, economic changes, as well as other factors set forth under the caption “Item 1A, Risk Factors” in our Annual Report on Form 10- K for the year ended December 31, 2024 (filed March 17, 2025) and our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2025 (filed May 8, 2025) and June 30, 2025 (filed August 7, 2025), and other factors detailed from time to time in our filings with the Securities and Exchange Commission.

Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate.

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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-Q

Item 2. Management’s Discussion and Analysis