ROCKY BRANDS, INC. 10-Q

ITEM 1 – FINANCIAL STATEMENTS Rocky Brands, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, except share amounts) (Unaudited) September 30, December 31, September 30, 2025 2024 2024 ASSETS: CURRENT ASSETS: Cash and cash equivalents $ 3,319 $ 3,719 $ 3,705 Trade receivables – net 82,564 71,983 77,130 Other receivables 96 1,028 177 Inventories – net 193,613 166,701 171,847 Prepaid expenses 5,658 3,008 5,205 Total current assets 285,250 246,439 258,064 LEASED ASSETS 4,890 6,030 6,705 PROPERTY, PLANT & EQUIPMENT – net 50,533 49,666 50,380 GOODWILL 47,844 47,844 47,844 IDENTIFIED INTANGIBLES – net 103,730 105,823 110,521 OTHER ASSETS 1,767 1,498 1,503 TOTAL ASSETS $ 494,014 $ 457,300 $ 475,017 LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $ 63,323 $ 58,069 $ 63,148 Current portion of long-term debt 8,361 8,361 8,361 Accrued expenses and other liabilities 32,471 23,977 20,845 Total current liabilities 104,155 90,407 92,354 LONG-TERM DEBT 130,684 120,376 141,929 LONG-TERM LEASE 2,183 3,537 4,232 DEFERRED INCOME TAXES 10,044 10,044 7,475 DEFERRED LIABILITIES 851 712 777 TOTAL LIABILITIES 247,917 225,076 246,767 SHAREHOLDERS' EQUITY: Common stock, no par value; - - - 25,000,000 shares authorized; issued and outstanding September 30, 2025 - 7,488,341 ; December 31, 2024 - 7,454,465 ; September 30, 2024 - 7,449,020 Additional paid-in-capital 75,449 73,866 73,537 Retained earnings 170,648 158,358 154,713 Total shareholders' equity 246,097 232,224 228,250 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 494,014 $ 457,300 $ 475,017 See Notes to Unaudited Condensed Consolidated Financial Statements 2 Table of Contents Rocky Brands, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 NET SALES $ 122,540 $ 114,554 $ 342,260 $ 325,718 COST OF GOODS SOLD 73,264 70,908 202,695 199,886 GROSS MARGIN 49,276 43,646 139,565 125,832 OPERATING EXPENSES 37,541 33,575 111,968 103,271 INCOME FROM OPERATIONS 11,735 10,071 27,597 22,561 INTEREST EXPENSE AND OTHER – net ( 2,493 ) ( 3,180 ) ( 7,367 ) ( 13,964 ) INCOME BEFORE INCOME TAX EXPENSE 9,242 6,891 20,230 8,597 INCOME TAX EXPENSE 2,030 1,612 4,468 2,011 NET INCOME $ 7,212 $ 5,279 $ 15,762 $ 6,586 INCOME PER SHARE Basic $ 0.96 $ 0.71 $ 2.11 $ 0.89 Diluted $ 0.96 $ 0.70 $ 2.10 $ 0.88 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 7,475 7,449 7,465 7,432 Diluted 7,543 7,503 7,511 7,479 See Notes to Unaudited Condensed Consolidated Financial Statements 3 Table of Contents Rocky Brands, Inc. and Subsidiaries Condensed Consolidated Statements of Shareholders ’ Equity (In thousands, except per share amounts) (Unaudited) Common Stock and Additional Paid-in Capital Total Shares Retained Shareholders' Outstanding Amount Earnings Equity BALANCE - December 31, 2023 7,412 $ 71,973 $ 151,582 $ 223,555 NINE MONTHS ENDED SEPTEMBER 30, 2024 Net income $ 2,550 $ 2,550 Dividends paid on common stock ($ 0.155 per share) ( 1,149 ) ( 1,149 ) Stock compensation expense 5 $ 339 - 339 BALANCE - March 31, 2024 7,417 $ 72,312 $ 152,983 $ 225,295 Net loss $ ( 1,243 ) $ ( 1,243 ) Dividends paid on common stock ($ 0.155 per share) ( 1,151 ) ( 1,151 ) Stock issued for options exercised, including tax benefits $ 599 - 599 Stock compensation expense 6 312 - 312 BALANCE - June 30, 2024 7,423 $ 73,223 $ 150,589 $ 223,812 Net income $ 5,279 $ 5,279 Dividends paid on common stock ($ 0.155 per share) ( 1,155 ) ( 1,155 ) Stock compensation expense 26 $ 314 - 314 BALANCE - September 30, 2024 7,449 $ 73,537 $ 154,713 $ 228,250 BALANCE - December 31, 2024 7,454 $ 73,866 $ 158,358 $ 232,224 NINE MONTHS ENDED SEPTEMBER 30, 2025 Net income $ 4,941 $ 4,941 Dividends paid on common stock ($ 0.155 per share) ( 1,156 ) ( 1,156 ) Repurchase of common stock ( 10 ) $ ( 201 ) - ( 201 ) Stock issued for options exercised, including tax benefits 1 19 - 19 Stock compensation expense 7 386 - 386 BALANCE - March 31, 2025 7,452 $ 74,070 $ 162,143 $ 236,213 Net income $ 3,608 $ 3,608 Dividends paid on common stock ($ 0.155 per share) ( 1,156 ) ( 1,156 ) Stock compensation expense 9 $ 400 - 400 BALANCE - June 30, 2025 7,461 $ 74,470 $ 164,595 $ 239,065 Net income $ 7,212 $ 7,212 Dividends paid on common stock ($ 0.155 per share) ( 1,159 ) ( 1,159 ) Stock issued for options exercised, including tax benefits 20 $ 561 - 561 Stock compensation expense 7 418 - 418 BALANCE - September 30, 2025 7,488 $ 75,449 $ 170,648 $ 246,097 See Notes to Unaudited Condensed Consolidated Financial Statements 4 Table of Contents Rocky Brands, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended September 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 15,762 $ 6,586 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 7,329 7,805 Noncash lease expense 2,084 1,943 Stock compensation expense 1,204 965 Provision for bad debts 538 1,172 Amortization of debt issuance costs and loan fees 496 454 Loss on term loan extinguishment - 1,111 Change in assets and liabilities: Receivables ( 10,186 ) ( 1,217 ) Contract receivables - 927 Inventories ( 26,912 ) ( 2,646 ) Other current assets ( 2,651 ) ( 1,843 ) Other assets ( 145 ) ( 131 ) Accounts payable 4,860 12,363 Operating lease liability ( 2,139 ) ( 1,931 ) Accrued and other liabilities 6,175 2,150 Income taxes 2,299 1,591 Contract liabilities - ( 927 ) Net cash (used in) provided by operating activities ( 1,286 ) 28,372 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets ( 5,709 ) ( 3,170 ) Proceeds from sale of business - 1,700 Net cash used in investing activities ( 5,709 ) ( 1,470 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving credit facility 39,187 128,394 Repayments on revolving credit facility ( 23,000 ) ( 118,713 ) Proceeds on term loan - 50,000 Repayments on term loan ( 6,271 ) ( 82,205 ) Payments of debt issuance costs and loan fees ( 229 ) ( 2,287 ) Proceeds from stock options 580 599 Repurchase of common stock ( 201 ) - Dividends paid on common stock ( 3,471 ) ( 3,455 ) Net cash provided by (used in) financing activities 6,595 ( 27,667 ) DECREASE IN CASH AND CASH EQUIVALENTS ( 400 ) ( 765 ) CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD 3,719 4,470 END OF PERIOD $ 3,319 $ 3,705 See Notes to Unaudited Condensed Consolidated Financial Statements 5 Table of Contents Rocky Brands, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except per share amounts) 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION We are a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names including The Original Muck Boot Company ("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: 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. The accompanying Unaudited Condensed Consolidated Financial Statements reflect all adjustments that are necessary for a fair presentation of the financial results. All such adjustments reflected in the Unaudited Condensed Consolidated Financial Statements are considered to be of normal and recurring nature. The results of operations for the three and nine months ended September 30, 2025 and 2024 are not necessarily indicative of the results to be expected for the whole year. The December 31, 2024 Unaudited Condensed Consolidated Balance Sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). This Quarterly Report on Form 10 -Q should be read in connection with our Annual Report on Form 10 -K for the year ended December 31, 2024 , which includes all disclosures required by GAAP. The preparation of financial statements in conformity with GAAP 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. 2. ACCOUNTING STANDARDS UPDATES Recently Issued Accounting Pronouncements Rocky Brands, Inc. is currently evaluating the impact of certain ASUs on its Unaudited Condensed Consolidated Financial Statements: Standard Description Anticipated Adoption Periods Effect on Consolidated Financial Statements ASU 2023 - 09, Income Taxes (Topic 740 ): 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. ASU 2025 - 06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350 - 40 ): Targeted Improvements to the Accounting for Internal-Use Software This pronouncement modernizes the accounting for internal-use software costs by removing all references to prescriptive and sequential software development stages. The new standard requires entities to consider whether significant development uncertainty has been resolved before starting to capitalize software costs and enhances disclosure requirements. Q4 2028 (fiscal year) Q1 2029 (interim period) The Company is still assessing the impact of the new accounting standard on its consolidated financial statements. On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBBA"). The OBBBA includes modifications to the international tax framework and amends and extends several provisions of the 2017 Tax Cuts and Jobs Act, including 100% bonus depreciation, the deductibility of domestic research and development expenses, and the business interest expense limitation. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company has evaluated the impact of the OBBBA and does not believe it will have a material impact on the Company's consolidated financial statements and related disclosures. 6 Table of Contents 3. FAIR VALUE The fair value accounting standard defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. This standard also establishes a three -level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: ● Level 1 – Quoted prices in active markets for identical assets or liabilities. ● Level 2 – Observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. ● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. The fair values of cash and cash equivalents, receivables, and payables approximate their carrying values because of the short-term nature of these instruments. Receivables consist primarily of amounts due from our customers, net of allowances, and expected insurance recoveries. The carrying amounts of our long-term credit facility and other short-term financing obligations also approximate fair value, as they are comparable to the available financing in the marketplace during the year. The fair value of our credit facilities is categorized as Level 2. We hold assets and liabilities in a separate trust in connection with deferred compensation plans. The deferred compensation assets are classified as trading securities within other assets and the deferred compensation liabilities are classified within deferred liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheet. The fair value of these assets is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1 ). 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 are 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. 4. REVENUE Nature of Performance Obligations Our products are distributed through three distinct channels, which represent our business segments: 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., 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 Judgments 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 may be 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. 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. 7 Table of Contents From time to time, we enter into non-cancellable contracts with the U.S. Military and other customers with a duration of one year or less. The contractual minimum payments under such contracts may result in current contract receivable balances. 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. As of September 30, 2025 , December 31, 2024, and September 30, 2024, there were 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 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. 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 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 12 - Segment Information for segment disclosures. 5. TRADE RECEIVABLES 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. Trade receivables are presented net of the related allowance for credit losses of approximat ely $ 0.8 mil lion, $ 1.0 million and $ 1.1 million at September 30, 2025 , December 31, 2024 and September 30, 2024 , respectively. 8 Table of Contents 6. INVENTORY Inventories are comprised of the following: September 30, December 31, September 30, ($ in thousands) 2025 2024 2024 Finished goods $ 174,955 $ 149,328 $ 153,722 Raw materials 17,920 16,671 17,196 Work-in-process 738 702 929 Total $ 193,613 $ 166,701 $ 171,847 The asset associated with our returns reserve included within inventories wa s approximatel y $ 0.9 mill ion, as of September 30, 2025 , December 31, 2024 and September 30, 2024 . 7. GOODWILL & IDENTIFIED INTANGIBLE ASSETS There was no change in goodwill during the nine months ended September 30, 2025 . Intangible assets other than goodwill at the respective balance sheet dates consisted of the following: September 30, 2025 Gross Accumulated Accumulated Carrying ($ in thousands) Amount Amortization Impairment (1) Amount Indefinite-lived intangible assets Trademarks $ 78,654 - $ ( 4,000 ) $ 74,654 Intangible assets subject to amortization - Patents 895 $ ( 872 ) - 23 Customer relationships 41,659 ( 12,606 ) - 29,053 Total intangible assets other than goodwill $ 121,208 $ ( 13,478 ) $ ( 4,000 ) $ 103,730 ( 1 ) Relates to the impairment of the Muck brand for the year ended December 31, 2024. December 31, 2024 Gross Accumulated Accumulated Carrying ($ in thousands) Amount Amortization Impairment (1) Amount Indefinite-lived intangible assets Trademarks $ 78,654 $ ( 4,000 ) $ 74,654 Intangible assets subject to amortization Patents 895 $ ( 863 ) - 32 Customer relationships 41,659 ( 10,522 ) - 31,137 Total intangible assets other than goodwill $ 121,208 $ ( 11,385 ) $ ( 4,000 ) $ 105,823 ( 1 ) Relates to the impairment of the Muck brand for the year ended December 31, 2024. September 30, 2024 Gross Accumulated Accumulated Carrying ($ in thousands) Amount Amortization Impairment Amount Indefinite-lived intangible assets Trademarks $ 78,654 - $ 78,654 Intangible assets subject to amortization Patents 895 $ ( 859 ) - 36 Customer relationships 41,659 ( 9,828 ) - 31,831 Total intangible assets other than goodwill $ 121,208 $ ( 10,687 ) - $ 110,521 9 Table of Contents The weighted average remaining life of patents and customer relationships is 2.6 years and 10.5 years, res pectively. Amortization expense for intangible assets subject to amortization for each of the three months ended September 30, 2025 and 2024 was $ 0.7 million. Amortization expense for intangible assets subject to amortization for the nine months ended September 30, 2025 and 2024 was $ 2.1 million. As of September 30, 2025 , a schedule of approximate expected remaining amortization expense related to intangible assets for the years ending December 31 is as follows: Amortization ($ in thousands) Year Expense 2025 $ 698 2026 2,788 2027 2,785 2028 2,781 2029 2,779 2030+ 17,245 Total $ 29,076 8. LONG-TERM DEBT On April 26, 2024, we refinanced our previous term debt and asset-based lending credit facilities 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 receivable and inventory balances. As of September 30, 2025 , we had borrowing capacity of $ 40.1 mil lion 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. The April 26, 2024 refinance of debt resulted in a $ 2.6 million expense within Interest Expense and Other - net in the accompanying Unaudited Combined Condensed 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 nine months ended September 30, 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 Unaudited Combined Condensed Statements of Cash Flows for the nine months ending September 30, 2024. 10 Table of Contents 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 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 I > 66.7% 2.75 % 1.50 % 1.25 % 0.00 % 1.75 % 0.50 % II >33.3% and < or equal to 66.7% 3.00 % 1.50 % 1.50 % 0.00 % 2.00 % 0.50 % III < 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: September 30, December 31, September 30, ($ in thousands) 2025 2024 2024 Term Facility that matures in 2029 with an effective interest rate of 7.67% as of September 30, 2025, 10.47% as of December 31, 2024 and 8.82% as of September 30, 2024, respectively $ 28,852 $ 35,123 $ 47,213 ABL Facility that matures in 2029: SOFR borrowings with an effective interest rate of 6.06% as of September 30, 2025, 6.24% as of December 31, 2024 and 6.76% as of September 30, 2024, respectively 110,800 91,300 105,000 Prime borrowings with an effective interest rate of 7.71% as of September 30, 2025, 7.77% as of December 31, 2024 and 8.47% as of September 30, 2024, respectively 1,265 4,577 470 Total debt 140,917 131,000 152,683 Less: Unamortized debt issuance costs ( 1,872 ) ( 2,263 ) ( 2,393 ) Total debt, net of debt issuance costs 139,045 128,737 150,290 Less: Debt maturing within one year ( 8,361 ) ( 8,361 ) ( 8,361 ) Long-term debt $ 130,684 $ 120,376 $ 141,929 A schedule of debt payments for the next five years is as follows: Debt Payment ($ in thousands) Year Schedule 2025 $ 2,090 2026 8,361 2027 8,361 2028 8,361 2029 113,744 Total $ 140,917 Credit Facility Covenants Our ABL Facility and Term Facility require us to maintain a minimum fixed charge coverage ratio, as defined in the ABL Agreement. As of September 30, 2025 , we were in compliance with all credit facility covenants. The ABL Facility and Term Facility also contain restrictions on the amount of dividend payments and share repurchases. As of September 30, 2025 , the Company was in compliance with the amounts paid on dividends and share repurchases in accordance with our credit facilities. We were in compliance with all applicable credit facility covenants under our previous term debt and asset-based lending credit facility through April 26, 2024, the date on which we refinanced such debt. 9. TAXES The effective tax rate for the three months ended September 30, 2025 and 2024 was 22.0 % and 23.4 %, respectively. The effective tax rate for the nine months ended September 30, 2025 and 2024 w as 22.1 % an d 23.4 %, r espectively. The effective tax rate used for interim reporting purposes is based on management’s best estimate of factors impacting the effective tax rate, including projected income from our domestic and international businesses, for the full fiscal year and includes the impact of discrete items recognized in the quarter. There can be no assurance that the effective tax rate estimated for interim financial reporting purposes will approximate the effective tax rate determined at fiscal year-end. The Company files income tax returns in the U.S. for federal, state, and local purposes, and in certain foreign jurisdictions. The Company's tax years 2019 through 2024 remain open to examination by most taxing authorities. Our policy is to accrue interest and penalties on any uncertain tax position as a component of income tax expense. No such expenses were recognized during the three and nine months ended September 30, 2025 and 2024 . We do not believe there will be any material changes in our uncertain tax positions over the next 12 months. 11 Table of Contents 10. EARNINGS PER SHARE Basic earnings per share ("EPS") is computed by dividing net income applicable to common shareholders by the weighted average number of common shares outstanding during each period. The diluted EPS computation includes common share equivalents, when dilutive. A reconciliation of the shares used in the basic and diluted income per common share computation for the three and nine months ended September 30, 2025 and 2024 is as follows: Three Months Ended Nine Months Ended September 30, September 30, (shares in thousands) 2025 2024 2025 2024 Basic - weighted average shares outstanding 7,475 7,449 7,465 7,432 Dilutive restricted share units 54 26 36 22 Dilutive stock options 14 28 10 25 Diluted - weighted average shares outstanding 7,543 7,503 7,511 7,479 Anti-dilutive securities 127 65 147 103 11. SUPPLEMENTAL CASH FLOW INFORMATION Supplemental cash flow information for the nine months ended September 30, 2025 and 2024 is as follows: Nine Months Ended September 30, ($ in thousands) 2025 2024 Interest paid $ 7,021 $ 13,376 Federal, state, and local income taxes paid, net $ 1,649 $ 226 Property, plant, and equipment purchases in accounts payable $ 395 $ 944 Right-of-use assets obtained in exchange for operating lease liabilities, net of terminations $ 944 $ 862 12. SEGMENT INFORMATION Reportable Segments - We have identified three reportable segments: Wholesale, Retail and Contract Manufacturing. Wholesale. 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., the U.K. and other international markets, mainly in Europe. These distribution channels vary by product line and target market 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. Retail. In our Retail segment, we market directly to consumers through our Lehigh business-to-business platform, consumer e-commerce websites, third -party marketplaces, and our Rocky Outdoor Gear Store. Through our outdoor gear store, we generally sell first quality or discontinued products in addition to a limited amount of factory damaged goods, which typically carry lower gross margins. Contract Manufacturing. In our Contract Manufacturing segment, we include 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. Net sales to foreign countries represented approximately 2.9 % and 4.8 % of net sales for the three months ended September 30, 2025 and 2024, respectively. Net sales to foreign countries represented approximately 2.8 % and 3.2 % of net sales for the nine months ended September 30, 2025 and 2024, respectively. 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. 12 Table of Contents The following is a summary of segment results for the Wholesale, Retail and Contract Manufacturing segments for the three and nine months ended September 30, 2025 and 2024 : Three Months Ended Nine Months Ended September 30, September 30, ($ in thousands) 2025 2024 2025 2024 NET SALES: Wholesale $ 89,117 $ 84,033 $ 236,993 $ 232,082 Retail 29,518 26,771 95,905 83,288 Contract Manufacturing 3,905 3,750 9,362 10,348 Total Net Sales $ 122,540 $ 114,554 $ 342,260 $ 325,718 COST OF GOODS SOLD: Wholesale $ 53,937 $ 52,519 $ 142,226 $ 146,105 Retail 15,693 15,088 51,879 44,569 Contract Manufacturing 3,634 3,301 8,590 9,212 Total Cost of Goods Sold $ 73,264 $ 70,908 $ 202,695 $ 199,886 GROSS MARGIN: Wholesale $ 35,180 $ 31,514 $ 94,768 $ 85,977 Retail 13,825 11,683 44,025 38,719 Contract Manufacturing 271 449 772 1,136 Total Gross Margin $ 49,276 $ 43,646 $ 139,565 $ 125,832 Segment asset information is not prepared or used to assess segment performance. 13. COMMITMENTS AND CONTINGENCIES Litigation 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 Unaudited Condensed Consolidated Financial Statements. Gain Contingency In June 2022, we became aware of a misclassification of Harmonized Tariff Schedule (HTS) codes filed with the U.S. Customs and Border Protection (U.S. Customs) on certain products imported into the U.S. during 2021 and 2022 associated with brands acquired through an acquisition in the first quarter of 2021. As a result of the misclassification of HTS codes on these products, we believe that we have paid duties in excess of the expected amount due. We have the potential to recover the total amount of overpaid duties resulting in an estimated potential refund of approximately $ 7.9 million, of which we have received $ 5.1 million to date. No refunds were received for the nine months ended September 30, 2025 and September 30, 2024. 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. Refunds received will be recognized as a reduction to the cost of goods sold when, and if, the refunds are received. 13 Table of Contents