What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-11 compared with 2025-03-17 · 267 added, 296 removed, 643 unchanged (47% of the section changed)

4 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2025 and 2024

4 unchanged sentences

ACCOUNTING STANDARDS UPDATES

SALE OF SERVUS BRAND AND RELATED ASSETS 37

SALE OF NEOS BRAND AND RELATED ASSETS 37

INVENTORIES 33

1 unchanged sentence

GOODWILL AND OTHER INTANGIBLE ASSETS

OTHER ASSETS 40

ACCRUED EXPENSES AND OTHER LIABILITIES

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COMMITMENTS AND CONTINGENCIES

SUBSEQUENT EVENTS 49

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

1 unchanged sentence

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

and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, shareholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, 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, 2025, 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 11, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting.

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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.

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

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.

We conducted our audits 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.

Our audits 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.

Our audits 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 audits provide a reasonable basis for our opinion.

Critical Audit Matter

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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

Goodwill and Other Intangible Assets -

Wholesale and Retail Reporting Units and Trademarks

Refer to Notes 1 and 5 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'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 value.

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.

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

The Company determines the fair value of trademarks ⁠based on the income approach using the relief from royalty method.

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

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 trademarks could have a significant impact on the valuation of the reporting units or the trademarks and the amount of a goodwill or indefinite-lived intangible asset impairment charge, if any.

We identified the valuation of the Wholesale and Retail reporting units and certain trademark indefinite-lived intangible assets 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 the forward-looking forecast compared to historical forecasts and results for each of the reporting units and trademarks.

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:

Our audit procedures related to the fair value of goodwill for the Wholesale and Retail reporting units and certain trademark indefinite-lived intangible assets 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.

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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

Rocky Brands, Inc.

and Subsidiaries

Nelsonville, Ohio

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, 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

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

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

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 audits 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 consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements.

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

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

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

/s/ Schneider Downs & Co., Inc.

Columbus, Ohio

March 15, 2024

Rocky Brands, Inc.

and Subsidiaries

Consolidated Balance Sheets

5 unchanged sentences

77,055 71,983

Contract receivables

Other receivables

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$ 52,958 $ 58,069

Contract liabilities

Current portion of long-term debt

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114,281 120,376

LONG-TERM TAXES PAYABLE

LONG-TERM LEASES

DEFERRED INCOME TAXES

12,381 10,044

DEFERRED LIABILITIES

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December 31, 2024 - 7,454,465

Additional paid-in-capital

76,090 73,866

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(In thousands, except per share amounts)

$ 481,976 $ 453,772

COST OF GOODS SOLD

284,686 274,762

197,290 179,010

OPERATING EXPENSES

160,103 147,944

INCOME FROM OPERATIONS

37,187 31,066

INTEREST EXPENSE AND OTHER – net

( 10,007 ) ( 17,008 )

INCOME BEFORE INCOME TAX EXPENSE

27,180 14,058

INCOME TAX EXPENSE

$ 22,274 $ 11,387

INCOME PER SHARE

$ 2.98 $ 1.53

$ 2.96 $ 1.52

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

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22 $ 599 - 599

Stock compensation expense

11 1,230 - 1,230

BALANCE - December 31, 2022

7,339 $ 69,752 $ 145,721 $ 215,473

$ 10,426 $ 10,426

Dividends paid on common stock ($ 0.62 per share)

( 4,565 ) ( 4,565 )

Stock issued for options exercised, including tax benefits

39 $ 977 - 977

Stock compensation expense

Stock-based compensation

20 1,294 - 1,294

4 unchanged sentences

( 4,634 ) ( 4,634 )

Stock issued for options exercised, including tax benefits

Repurchase of common stock

( 10 ) $ ( 201 ) - ( 201 )

Stock compensation expense

Stock issued for options exercised and other rewards, including tax benefits

Stock-based compensation

29 1,617 - 1,617

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CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

$ 22,274 $ 11,387

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Intangible impairment charge

Noncash lease expense

Provision for bad debts

Deferred income taxes

Stock compensation expense

Provision for bad debts

Amortization of debt issuance costs and loan fees

Gain on insurance proceeds received for damaged equipment

Intangible impairment charge

Loss on term loan extinguishment

Amortization of debt issuance costs

Gain on sale of business

Deferred income taxes

Loss (gain) on disposal of assets

Change in assets and liabilities:

Changes in assets and liabilities:

( 9,983 ) 2,572

Contract receivables

( 14,433 ) 2,500

Other current assets

( 173 ) ( 107 )

Accounts payable

( 5,972 ) 7,745

Operating lease liability

( 2,875 ) ( 2,619 )

Accrued and other liabilities

( 1,611 ) 1,645

Contract liabilities

Net cash provided by operating activities

16,299 52,764

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of fixed assets

Proceeds from the sale of assets

Purchases of fixed assets

( 6,576 ) ( 4,663 )

Insurance proceeds received for damaged equipment

Proceeds from sale of business

Net cash (used in) provided by investing activities

Net cash used in investing activities

( 6,204 ) ( 2,963 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from revolving credit facility

53,744 139,801

Repayments on revolving credit facility

Proceeds from term loan

( 52,000 ) ( 139,713 )

Proceeds on term loan

Repayments on term loan

Debt issuance costs

( 8,361 ) ( 94,295 )

Payments of debt issuance costs and loan fees

( 268 ) ( 2,333 )

Proceeds from stock options

Repurchase of common stock

Dividends paid on common stock

( 4,634 ) ( 4,611 )

Net cash used in financing activities

( 10,912 ) ( 50,552 )

DECREASE IN CASH AND CASH EQUIVALENTS

( 817 ) ( 751 )

CASH AND CASH EQUIVALENTS:

1 unchanged sentence

END OF PERIOD

$ 2,902 $ 3,719

See notes to Consolidated Financial Statements

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Ltd., UK Footwear Holdings Limited and Rocky Outdoor Gear Store, LLC (collectively referred to as the "Company").

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 Muck, Rocky, Georgia Boot, Durango, Lehigh, XTRATUF, Ranger and the licensed brand Michelin.

All intercompany transactions have been eliminated.

Reclassification - Certain amounts in the prior year's consolidated financial statements and footnotes were reclassified to conform to the current year's presentation.

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, XTRATUF, Rocky, Durango, Georgia Boot, Lehigh, 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:

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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.

Foreign Currency - We have determined that the functional currency for our international subsidiaries is 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.

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Trade receivables are presented net of the related allowance for credit losses of approximately $ 0.7 million and $ 1.0 million at December 31, 2025 and 2024 , respectively.

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

No customer represented 10% of net trade receivables as of December 31, 2024 and 2023 .

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

Our exposure to credit risk is impacted by the economic climate affecting the retail shoe industry.

We manage this risk by performing ongoing credit evaluations of our customers, maintaining reserves for potential uncollectible accounts and utilizing credit insurance for some of our key customers.

As of December 31, 2025, one customer represented approximately 15.0 % of net trade receivables.

Management believes the credit risk associated with this customer is limited.

As of December 31, 2024, there were no customers that represented 10.0% or more of net trade receivables.

Supplier and Labor Concentrations - We purchase raw materials from a number of domestic and foreign sources.

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

We source a significant portion of our footwear, apparel and gloves from manufacturers in Asia, primarily in China and Vietnam.

We source a significant portion of our footwear, apparel and gloves from manufacturers in Vietnam, China, the Dominican Republic, Cambodia, Puerto Rico, India, and Mexico.

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

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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:

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

Buildings and improvements

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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.

Indefinite-lived intangibles include trademarks.

Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to impairments tests at least annually.

The Company reviews the carrying amounts of goodwill and indefinite-lived intangible assets by reporting unit at least annually, or when indicators of impairment are present, to determine if such assets may be impaired.

The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of goodwill and indefinite-lived intangible assets are less than their carrying value.

The Company would not be required to quantitatively determine the fair value unless the Company determines, based on the qualitative assessment, that it is more likely than not that its fair value is less than the carrying value.

The Company performs its annual testing for goodwill and indefinite-lived intangible asset impairment in the fourth quarter of the fiscal year for all reporting units.

We review the carrying amounts of goodwill and indefinite-lived intangible assets by reporting unit at least annually, or when indicators of impairment are present, to determine if such assets may be impaired.

We may first assess qualitative factors to determine whether it is more likely than not that the fair value of goodwill and indefinite-lived intangible assets are less than their carrying value.

We would not be required to quantitatively determine the fair value unless we determine, based on the qualitative assessment, that it is more likely than not that its fair value is less than the carrying value.

We perform our annual testing for goodwill and indefinite-lived intangible asset impairment in the fourth quarter of the fiscal year for all reporting units.

Goodwill is quantitatively evaluated for possible impairment by comparing the estimated fair value of the reporting unit with its carrying value, including the goodwill assigned to that reporting unit.

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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.

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

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.

Our leases may include variable lease costs such as payments based on changes to an index, maintenance, and utilities.

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

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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.

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 outdoor gear store.

Revenue is measured as the amount of consideration we expect to receive in exchange for the transfer of our products, which is net sales price.

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.

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

For our outdoor gear 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.

Advertising - We expense advertising costs as incurred.

- Advertising costs associated with print and media advertisements are typically expensed in the first period in which the advertising takes place, and other advertising costs are expensed as incurred.

Advertising expense was approximately $ 23.4

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

All outbound shipping costs to customers have been included in operating expenses and totaled approximately $ 27.0 million, $ 25.1 million and $ 38.5 million in 2024 , 2023 and 2022 , respectively.

All outbound shipping costs to customers have been included in operating expenses and totaled approximately $ 30.1 million and $ 27.0 million in 2025 and 2024 , respectively.

Stock Compensation Expense - We recognize compensation expense for awards of stock options, restricted stock units ("RSUs"), and director stock units based on the fair value on the grant date and on a straight-line basis over the requisite service period for the awards that are expected to vest, with forfeitures estimated based on our historical experience and future expectations.

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Receivables consist primarily of amounts due from our customers, 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 third -party marketplace during the year.

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

The carrying amounts of our long-term credit facilities and other short-term financing obligations approximate fair value, as they are comparable to financing in the third -party marketplaces due to their variable interest rate terms.

Our long-term credit facilities and short-term financing obligations are classified 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 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 and are therefore classified as 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 have been reduced to fair value when impaired.

These assets primarily include property, plant, and equipment, operating lease assets, definite-lived intangibles and 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.

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.

There was no impairment charge for such assets recorded during the year end December 31, 2025.

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

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

3 unchanged sentences

The trust assets and liabilities are classified as trading securities within prepaid expenses and other current assets and deferred liabilities, respectively 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 ).

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

ACCOUNTING STANDARDS UPDATES

Recently Issued Accounting Pronouncements

Rocky Brands, Inc.

is currently evaluating the impact of certain ASUs on its Consolidated Financial Statements or Notes to the Consolidated Financial Statements:

Rocky Brands is currently evaluating the impact of certain ASUs on its Consolidated Financial Statements or Notes to the Consolidated Financial Statements:

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.

Disaggregation of Income Statement Expenses This pronouncement requires disclosure of disaggregated information about certain income statement expense line items within the notes to the consolidated financial statements.

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

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.

ASU 2025 - 11, Interim Reporting (Topic 270 ) Narrow-Scope Improvements This pronouncement improves the navigability of the required interim disclosure and clarification around the principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity.

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 the Current Year

Effect on the financial statements or other significant matters

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.

The Company has included all required disclosures within its Form 10 -K for the year ended December 31, 2025.

See Note 10 - Taxes for further information on income taxes.

Accounting Standards Adopted in the Prior Year

Effect on the financial statements or other significant matters

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

1 unchanged sentence

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

On March 30, 2023, we completed the sale of the Servus brand and related assets to PQ Footwear, LLC and Petroquim S.R.L.

(collectively "the Buyer").

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.

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.

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.

The Company has included all required disclosures within its Form 10 -K for the year ended December 31, 2025 and 2024.

See Note 16 - Segment Information for further information on segment disclosures.

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.

There was no significant impact to our effective tax rate as a result of OBBBA in the current year.

We will continue to evaluate the impact of OBBBA on our consolidated financial statements and related disclosures for future years.

Inventories are comprised of the following:

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Construction work-in-progress

12,007 10,969

Net Fixed Assets

$ 49,929 $ 49,666

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

We incurred approximately $ 7.1 million and $ 7.5 million in depreciation expense for the years ended December 31, 2025 and 2024 , respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and indefinite-lived intangibles are tested for impairment at least annually by comparing the estimated fair values of our reporting units and indefinite-lived intangible assets to their respective carrying values.

For goodwill, we estimated the fair value of each reporting unit by weighing the results of the income and market approaches.

For goodwill, we estimate the fair value of each reporting unit by weighing the results of the income and market approaches.

These valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, discount rates, and comparable multiples from publicly traded companies in our industry and require us to make certain assumptions and estimates regarding industry economic factors and future profitability of our business.

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

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.

There was no impairment charge for indefinite-lived intangible assets recorded during the year ended December 31, 2025.

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 trademarks.

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

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 third -party marketplace participants;

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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 and/or intangible assets impairment.

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

($ in thousands)

Goodwill balance at beginning of the year (1)

$ 47,844 $ 50,246

Sale of Business (2)

Goodwill balance at end of the year (1)

$ 47,844 $ 47,844

( 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.

There were no changes in the carrying amount of goodwill for the years ended December 31, 2025 or 2024.

Goodwill was $ 47.8 million as of December 31, 2025 and 2024.

A schedule of identified intangible assets is as follows:

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($ in thousands)

Impairment (1)

Indefinite-lived intangible assets

Trademarks (1)

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

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$ 121,208 $ ( 14,175 ) $ ( 4,000 ) $ 103,033

( 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.

( 1 ) Accumulated impairment relates to impairment of the Muck trademarks recognized during the year ended December 31, 2024.

The amount allocated to our Wholesale and Retail reporting segments was $ 3.6 million and $ 0.4 million, respectively.

December 31, 2024

($ in thousands)

Impairment (1)

Indefinite-lived intangible assets

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

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:

($ in thousands)

Other assets consist of the following:

( 1 ) Accumulated impairment relates to impairment of the Muck trademarks recognized during the year ended December 31, 2024.

The amount allocated to our Wholesale and Retail reporting segments was $ 3.6 million and $ 0.4 million, respectively.

The weighted average remaining life of patents and customer relationships is 2.4 years and 10.3 years, respectively.

Amortization expense for intangible assets subject to amortization for the twelve months ended December 31, 2025 and 2024 was $ 2.8 million.

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

($ in thousands)

Long-term deposits

Deferred loan fees

NQDC plan assets

$ 1,498 $ 965

ACCRUED EXPENSES AND OTHER LIABILITIES

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Accrued expenses and other liabilities:

Accrued duties

Accrued tariffs and duties

$ 15,272 $ 6,807

Accrued freight

Salaries and wages

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Returns liability

Accrued advertising

Taxes - other

Income taxes payable

Accrued interest

Total accrued expenses and other liabilities

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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 refinance 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.

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($ 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 .

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

Average Availability as a Percentage of Commitments

Term SOFR Loan

Base Rate for FILO

Term SOFR FILO Loans

Term Facility that matures in 2029 with an effective interest rate of 7.50 % as of December 31, 2025, and 10.47 % as of December 31, 2024

$ 26,762 $ 35,123

>33.3% and < or equal to 66.7%

ABL Facility that matures in 2029:

SOFR borrowings with an effective interest rate of 5.62 % as of December 31, 2025, and 6.24 % as of December 31, 2024

94,300 91,300

< or equal to 33.3%

Prime borrowings with an effective interest rate of 7.16 % as of December 31, 2025, and 7.77 % as of December 31, 2024

124,383 131,000

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)

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

( 1,741 ) ( 2,263 )

Total debt, net of debt issuance costs

122,642 128,737

Debt maturing within one year

( 8,361 ) ( 8,361 )

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.

$ 114,281 $ 120,376

Contractual maturities of total debt are 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 ABL Agreement.

As of December 31, 2025 and 2024, we were incompliance 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 December 31, 2025 and 2024, 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.

Interest expense was approximately $ 10.0 million and $ 17.0 million for the years ended December 31, 2025 and 2024, respectively.

The following is a summary of the Company's lease cost:

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Short-term lease cost

1,205 504 2,166

Variable lease cost

Total lease cost

$ 4,224 $ 4,464

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:

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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, 2025 is 4.1 %.

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The assets held by the trust were approximately $ 0.6 million and $ 0.5 million as of December 31, 2025 and December 31, 2024 , 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 as of December 31, 2024 and December 31, 2023 , and are classified within deferred liabilities in the accompanying consolidated balance sheets.

The liabilities held under the Executive Deferred Compensation Plan were approximately $ 0.3 million and $ 0.2 million as of December 31, 2025 and December 31, 2024 , 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 funds are accrued based on service and are not held in an investment or trust account.

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.

The total liabilities held under the Dominican Plan were approximately $ 0.4 million as of December 31, 2025 and December 31, 2024 , and are classified within deferred liabilities in the accompanying consolidated balance sheets.

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.

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.

We recognize Global Intangible Low-Taxed Income ("GILTI") as a period expense in the period the tax is incurred.

We do not record deferred tax assets or liabilities for basis differences that may result in future GILTI inclusions.

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

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$ 2,107 $ ( 926 )

2,337 ( 977 ) ( 1,417 )

Total Federal

1,411 2,900 4,576

State & local:

Total State & local

Total Foreign

$ 4,906 $ 2,671

The following table reconciles the taxes calculated at the U.S.

federal statutory tax rate to the total income tax expense for the year ended December 31, 2025:

($ in thousands)

Income Taxes at U.S.

statutory rate

$ 5,722 21.0 %

Total state & local

State and local income taxes, net of federal income tax effect (a)

Foreign tax effects

Dominican Republic

Exempt income from Dominican Republic operations

( 451 ) ( 1.7 )

Difference in foreign tax rate

( 268 ) ( 0.9 )

Total foreign

( 27 ) ( 0.1 )

( 188 ) ( 0.7 )

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:

Year Ended December 31,

Effect of cross-border laws

Foreign branch income

( 109 ) ( 0.3 )

Nontaxable or nondeductible items

Other adjustments

Deferred adjustment

( 349 ) ( 1.3 )

Total income tax expense

$ 4,906 18.1 %

(a) State Taxes in Georgia and California made up the majority (greater than 50 percent) of the tax effect in this category.

The following table presents the required disclosures prior to our adoption of ASU 2023 - 09 and reconciles the taxes calculated at the U.S.

federal statutory tax rate to the total income tax expense for the year ended December 31, 2024:

($ in thousands)

Expected expense at statutory rate

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

Increase (decrease) in income taxes resulting from:

Tax on repatriated earnings from foreign operations

Tax on repatriated earnings from Dominican Republic operations

State and local income taxes

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Change in valuation allowance

( 200 ) 355 -

Provision to return filing adjustments and other

( 117 ) 329 ( 352 )

Foreign tax credit

( 468 ) ( 227 ) ( 348 )

Exempt income from Dominican Republic operations due to tax holiday

( 512 ) ( 476 ) ( 632 )

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

Total income tax expense

Deferred income taxes recorded in the Consolidated Balance Sheets at December 31, 2025 and 2024 consisted of the following:

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Net operating losses

163(J) Interest limitation

State and local income taxes

Pension and deferred compensation

163(J) Interest limitation

Total deferred tax assets

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12,723 11,908

Lease liabilities

Lease liability

Tollgate tax on Lifestyle earnings

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The valuation allowance as of December 31, 2025 is related to certain foreign income tax net operating loss carry forwards.

We have provided Puerto Rico tollgate taxes on approximately $ 3.7 million of accumulated undistributed earnings of Lifestyle prior to the fiscal year ended June 30, 1994, that would be payable if such earnings were repatriated to the United States.

We have provided Puerto Rico tollgate taxes on approximately $ 3.7 million of accumulated undistributed earnings of Lifestyle prior to the fiscal year ended June 30, 1994 that would be payable if such earnings were repatriated to the U.S.

In 2001, we received abatement for Puerto Rico tollgate taxes on all earnings subsequent to June 30, 1994;

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If we repatriate the earnings from Lifestyle, $ 0.2 million of tollgate tax would be due as of December 31, 2025 .

We are subject to income taxes in the U.S.

and various foreign jurisdictions.

The Company benefits from tax incentive programs in certain foreign jurisdictions, principally Puerto Rico and the Dominican Republic.

Our Puerto Rican operations are subject to a Grant of Tax Exemption under Puerto Rico Act 60 - 2019.

This grant, which constitutes a contractual agreement with the Government of Puerto Rico, provides for a 15 -year exemption period effective January 1, 2022.

Under the terms of the grant, qualifying income is subject to a fixed income tax rate of 4.0 %.

For the year ended December 31, 2025, we generated approximately $ 1.6 million of income subject to the 4.0 % preferential tax rate.

Our operations in the Dominican Republic operate under the Free Trade Zone regime pursuant to Law No.

Under this regime, we benefit from a tax incentive program that includes a 0 % income tax rate on qualifying income.

The operating permit, which allows us to legally operate under the country's Free Zone regime, was issued by the National Free Zone Council and is valid until 2032 upon which time it will be renewed.

For the year ended December 31, 2025, we generated approximately $ 2.1 million of income subject to the 0 % income tax rate.

Income tax payments by jurisdiction, net of refunds, were composed of the following for the year ended December 31, 2025:

($ in thousands)

For the year ended December 31, 2024, we received total tax refunds of approximately $ 1.9 million, net of payments.

We are subject to tax examinations in various taxing jurisdictions.

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SHAREHOLDERS' EQUITY

Repurchase of Common Stock

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

Under the repurchase program, which expired on February 24, 2026, common shares could be purchased in open market or privately negotiated transactions in compliance with the Securities and Exchange Commission Rule 10b - 18, subject to market conditions, applicable legal requirements, and other relevant factors.

This share repurchase program did not obligate the Company to acquire any particular amount of common stock and may have been suspended at any time at the Company's discretion.

During the year ended December 31, 2025, 10,456 shares of outstanding common stock were repurchased under the plan on the open market with an average price paid per share of $ 19.21 .

As of December 31, 2025, $ 7,299,140 remained available under the stock repurchase program for repurchase.

Preferred Shares

The Company has authorized 250,000 shares of voting preferred stock with no par value.

The Company has authorized

shares of voting preferred stock with no par value.

No shares are issued or outstanding.

Also, the Company has authorized 250,000 shares of non-voting preferred stock with no par value.

Of these, 125,000 shares have been designated Series A non-voting convertible preferred stock with a stated value of $0.06 per share, of which no shares are issued or outstanding at December 31, 2024 and 2023 .

Also, the Company has authorized

shares of non-voting preferred stock with no par value.

shares have been designated Series A non-voting convertible preferred stock with a stated value of $0.06 per share, of which no shares are issued or outstanding at

December 31, 2025 and 2024

SHARE-BASED COMPENSATION

On May 7, 2014, our shareholders approved the 2014 Omnibus Incentive Plan and in May 2021 this plan was amended as our shareholders authorized an additional 600,000 shares (as amended, the "2014 Plan").

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 authorized to issue 502,325 shares under the 2014 Plan.

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

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

As of December 31, 2024, there were no shares authorized to issue under the 2014 Plan as the plan expired upon adoption of the 2024 Omnibus Incentive Plan.

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

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As of December 31, 2025, we were authorized to issue 448,788 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.

During the years ended December 31, 2025 and 2024 , we issued 28,678 shares and 19,634 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, 2025 and 2024.

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

Expected dividend yield

Expected volatility of Rocky's common stock

Expected option term (years)

Weighted-average grant date fair value per share

For the years ended December 31, 2025 and 2024 , we recognized share-based compensation expense and the corresponding tax benefit as follows:

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133,150 $ 28.86 3.2 $ 469,811

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.

For the years ended December 31, 2025 and 2024 , cash received for the exercise of stock options was approximately $ 0.8 million and $ 0.6 million, respectively.

Restricted Stock Units

Under the 2024 Omnibus Incentive Plan, restricted stock units may be granted to certain eligible employees and officers in accordance with the applicable equity compensation agreements.

Subject to participants' continued employment and other plan terms and conditions, the awards generally vest over three years.

The fair value of each restricted stock unit is estimated based on the fair value of the Company's common stock on the date of the grant.

The following table summarizes the status of the Company's restricted stock units and activity as of December 31, 2025 :

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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

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.

In our Wholesale business, we distribute our products through a wide range of distribution channels representing thousands of 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, 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.

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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

Nature of Performance Obligations

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.

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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.

On occasion, 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.

Our contract liability represents unconditional obligations to provide goods under non-cancellable contracts with the U.S.

Military and other customers.

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 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

The following table provides information about contract liabilities from contracts with our customers.

($ in thousands)

Contract liabilities

Significant changes in the contract liabilities balance during the period are as follows:

($ in thousands)

Contract liabilities

Balance, December 31, 2023

Non-cancelable contracts with customers entered into during the period

Revenue recognized related to non-cancelable contracts with customers during the period

Balance, December 31, 2024

As of December 31, 2025 and 2024, there are no contract receivable or contract liability balances outstanding.

Disaggregation of Revenue

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.

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 outdoor gear 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.

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$ 9,355 $ 16,170

Federal, state, and local income taxes paid, 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., U.K.

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

These distribution channels vary by product line and target market and include sporting goods stores, outdoor retailers, independent shoe retailers, hardware stores, mass merchants, uniform stores, farm store chains, specialty safety stores, specialty retailers and online retailers.

In our Retail segment, we market directly to consumers through our Lehigh business-to-business including direct sales and through our CustomFit websites, consumer e-commerce websites, third -party marketplaces, and our Rocky Outdoor Gear Store.

3 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.

Net sales to foreign countries represented approximately 2.3 % of net sales in 2025 and 3.2 % of net sales in 2024 .

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

totaled $ 11.1 million at December 31, 2025 , of which approx imately $ 3.7 mill ion resides in the Dominican Republic and approximatel y $ 7.4 mil lion resides in China.

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.

21 unchanged sentences

Contract Manufacturing

1,612 722 2,343

Total Gross Margin

3 unchanged sentences

($ in thousands)

Contract Manufacturing

Work footwear

2 unchanged sentences

120,484 45,216 - 165,700 34.4 %

Western footwear

67,483 8,897 - 76,380 15.8 %

5 unchanged sentences

$ 316,561 $ 152,889 $ 12,526 $ 481,976 100 %

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.

December 31, 2024

, of which approx

imately $ 3.7 mill

ion resides in the Dominican Republic and approximatel

lion resides in China.

($ in thousands)

Contract Manufacturing

Work footwear

$ 106,187 $ 81,873 $ 2,289 $ 190,349 41.9 %

Outdoor footwear

100,872 29,350 - 130,222 28.7 %

Western footwear

74,040 8,599 - 82,639 18.2 %

Duty and commercial military footwear

31,476 3,071 - 34,547 7.6 %

Military footwear

- - 11,275 11,275 2.5 %

765 3,975 - 4,740 1.0 %

$ 313,340 $ 126,868 $ 13,564 $ 453,772 100 %

COMMITMENTS AND CONTINGENCIES

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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.

No refunds were received for the twelve months ended December 31, 2025 and 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 consolidated balance sheet due to uncertainty of collection.

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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.

On February 24, 2026, Rocky Brands announced that its Board of Directors 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 February 24, 2026 and has a one year term expiring on February 23, 2027.

Dividends Declared

1 unchanged sentence

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.

Subsequent Event

On February 20, 2026, the U.S.

Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") were unlawful.

The ultimate availability, timing, and amount of any potential refunds associated with IEEPA tariffs previously paid by the Company remain highly uncertain and are subject to further legal, regulatory, and administrative developments.

Following the Supreme Court's decision, the U.S.

presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs.

There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on the Company's business.

The Company continues to monitor and evaluate these developments and assess their potential impact on the Company's business, financial condition, and results of operations.

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