What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-05 compared with 2025-11-06 · 82 added, 159 removed, 91 unchanged (73% of the section changed)

1 unchanged sentence

BUSINESS OVERVIEW

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

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

Our portfolio of brands is organized into three reportable segments in which our product is distributed:

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

In 2025, the U.S.

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

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

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

Growth in our Retail segment was driven in part by an increase in our Lehigh CustomFit business as we expand our customer base and product offerings.

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

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

We continue to monitor changes in policy impacting global trade, including tariffs, which have been dynamic, unpredictable, and subject to ongoing modification.

Beginning in early 2025, pursuant to the Inte rnational Emergency Economic Powers Act ("IEEPA"), significant additional tariffs were imposed on products imported from various countries, including those countries where we primarily source our products.

In February 2026, the U.S.

Supreme Court invalidated certain tariffs imposed under the IEEPA and in March 2026, the U.S.

Court of International Trade ordered the U.S.

Customs and Border Protection Agency ("CBA") to suspend collection of the invalidated tariffs and to establish a process to refund IEEPA tariffs previously collected.

As a result of this ruling, we may be eligible to receive refunds of tariffs previously paid on qualifying imports.

We have paid approximately $20.5 million in tariffs for products that were subject to the invalidated IEEPA tariffs.

Beginning in April 2026, we began filing refund claims with CBP related to eligible IEPPA tariff payments made.

There can be no guarantee that a refund, if received, will equal the full amount of IEEPA tariffs paid, and any refund may be subject to further legal and regulatory developments.

As a result of the uncertainty, we have not recorded a receivable related to the potential recovery of IEEPA tariffs paid as of March 31, 2026.

Additionally, following the Supreme Court's ruling invalidating the IEEPA tariffs, the U.S.

imposed a temporary 10% general tariff under Section 122 of the Trade Act of 1974.

There remains substantial uncertainty regarding the potential changes or pauses to existing and newly announced tariffs, tariff levels, and whether additional tariffs or other reciprocal actions may be imposed, modified, or suspended.

We have implemented, and plan to continue to implement, as needed, various mitigation strategies including adjusting the prices of our products, adjusting the countries from which we source our products and further leveraging our own manufacturing facilities in the Dominican Republic and Puerto Rico.

Proposed or enacted tariffs and changes to U.S.

trading policies may be restituted, paused, removed, or changed at any time and to the extent we are unable to successfully mitigate any negative resulting impacts it could adversely affect our business, financial condition, and results of operation.

During the first quarter of 2026, we experienced an increase in net sales over the first quarter of 2025.

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

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

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

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

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

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

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

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

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

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

THIRD QUARTER 2025 FINANCIAL HIGHLIGHTS COMPARED TO THIRD QUARTER 2024

We continue to benefit from the strength and growth of our Retail segment with the third consecutive quarter of growth in our Retail segment net sales.

Growth in our Retail segment was driven by increases across all of our Retail selling channels.

The increase in net sales on our e-commerce websites and third-party marketplace platforms was driven by a continued focus on our digital marketing and expansion into new marketplaces.

The increase in net sales in our Lehigh CustomFit business was attributed to expanding our customer base and product offerings.

We saw a decrease in gross margin as a percentage of sales in our Wholesale and Retail segments as a result of increased product costs due to elevated tariff costs recognized during the quarter partially offset by tariff-related price increases.

Our operating expenses as a percentage of net sales for the three months ending March 31, 2026 was consistent with that of the prior year period.

Interest expense declined for the three months ending March 31, 2026 compared to the same period in 2025 due to continued debt repayments over the past twelve months, which have reduced the overall outstanding principal balances, as well as a decrease in interest rates.

The decrease in inventory as of March 31, 2026 compared to March 31, 2025 was primarily due to our efforts to optimize our inventory position by reducing our discontinued inventory levels throughout the year.

FIRST QUARTER 2026 FINANCIAL HIGHLIGHTS COMPARED TO FIRST QUARTER 2025

Net sales increased 9.1% to $124.4 million

Gross margin increased 210-basis points to 40.2%

Inventories increased 12.7% to $193.6 million

Gross margin decreased 470-basis points to 36.5%

Inventories decreased 1.6% to $172.6 million

Total debt decreased 5.0% to $122.2 million

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

Net sales increased 5.1% to $342.3 million

Gross margin increased 220-basis points to 40.8%

Operating income as a percentage of net sales increased 120-basis points to $27.6 million

Net income increased to $15.8 million, or $2.10 per diluted share

RESULTS OF OPERATIONS

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Three Months Ended

Nine Months Ended

September 30,

($ in thousands)

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Income from operations

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

Net sales increased to $124.4 million in the first quarter of 2026 compared to $114.1 million in the first quarter of 2025.

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

Wholesale, Retail, and Contract Manufacturing.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Gross margin in the first quarter of 2026 was $45.4 million, or 36.5% of net sales, compared to $47.0 million, or 41.2% of net sales, in the first quarter of 2025.

The 470-basis point decrease in gross margin was primarily driven by increased sourcing variances, mainly higher tariffs, in the first quarter of 2026 compared to the first quarter of 2025.

Operating expenses for the first quarter of 2026 wer e $41.8 million, or 33.6% of net sales, compared to $38.3 million, or 33.6% of net sales, for the first quarter of 2025.

Income from operations for the first quarter of 2026 was $3.6 million, or 2.9% of net sales, compared to $8.7 million, or 7.6% of net sales, in the year ago period.

The decrease in income from operations was primarily driven by the decrease in gross margin for the three months ended March 31, 2026, compared to the year ago period.

Three Months Ended March 31, 2026 compared to Three Months Ended March 31, 2025

Three Months Ended

September 30,

($ in thousands)

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Total Net Sales

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

Wholesale net sales for the three months ended March 31, 2026 were $78.4 million compared to $74.8 million for the three months ended March 31, 2025.

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

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

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

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

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

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

These factors have largely offset supply chain and tariff pressures.

Retail net sales for the three months ended March 31, 2026 were $42.7 million compared to $36.6 million for the three months ended March 31, 2025.

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

We upgraded our e-commerce platform during the third quarter of 2025 and have increased our investments in digital advertising, driving more traffic to our website and increasing our net sales in the first quarter of 2026 compared to the prior year period.

We experienced an increase in our Lehigh CustomFit business as we continue to expand our customer base and increase product offerings.

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

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

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

Military in the current year.

Contract Manufacturing net sales for the three months ended March 31, 2026 were $3.3 million compared to $2.7 million for the three months ended March 31, 2025.

The increase in Contract Manufacturing net sales was due to increased sales to the U.S.

Three Months Ended

September 30,

($ in thousands)

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Total Margin $'s

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

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

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

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

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

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

Who lesale gross margin for the three months ended March 31, 2026 was $27.0 million, or 34.4% of net sales, compared to $30.1 million, or 40.3% of net sales, for the three months ended March 31, 2025 .

The lower Wholesale gross margin in the first quarter of 2026 compared to the first quarter 2025 was due to higher tariff-related costs offset by tariff-related price increases and mitigation actions taken over the past twelve months to diversify our sourcing and leverage our own manufacturing facilities.

The unfavorable tariff costs were also partially offset by an on-goin g favorable shift in our branded sales mix, with our rubber boot brands delivering stronger growth relative to the rest of the brands in our portfolio.

Our rubber boots products typically yield higher gross margins than other products within our brand portfolio.

Retail gross margin for the three months ended March 31, 2026 was $18.2 million, or 42.6% of net sales, compared to $16.7 million, or 45.7% of net sales, for the three months ended March 31, 2025.

The decrease in Retail gross margin as a percentage of net sales was attributable to higher tariff-related costs offset by price increases.

The unfavorable tariff costs were also partially offset by an on-going favorable shift in our branded sales mix, with our rubber boot brands delivering stronger growth relative to the rest of the brands in our portfolio.

Our rubber boots product typically yield higher gross margins than other products within our brand portfolio.

Contract Manufacturing gross margin for the three months ended March 31, 2026 was $0.3 million, or 9.2% of net sales, compared to $0.2 million, or 5.8% of net sales, for the three months ended March 31, 2025 .

The increase in gross margin was driven by increased economies of scale at our Puerto Rico manufacturing facility as we increased production there.

Three Months Ended

September 30,

($ in thousands)

OPERATING EXPENSES

General and administrative

Sales and marketing

Depreciation and amortization

Operating Expenses

% of Net Sales

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

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

Operating expenses for the three months ended March 31, 2026 and March 31, 2025 were $41.8 million and $38.3 million, respectively, or 33.6% of sales.

The increase in operating expenses was due to higher logistics costs associated with the increase in Retail sales.

Three Months Ended

September 30,

($ in thousands)

INTEREST EXPENSE AND OTHER:

Interest expense

Other income, net

Total Interest Expense and Other

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

INTEREST EXPENSE AND OTHER - net

Interest Expense and Other - net for the three months ended March 31, 2026 was $2.0 million compared to $2.4 million in the year ago period.

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

Three Months Ended

September 30,

($ in thousands)

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Effective Tax Rate

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

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

Nine Months Ended

September 30,

($ in thousands)

Contract Manufacturing

Total Net Sales

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

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

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

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

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

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

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

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

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

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

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

Nine Months Ended

September 30,

($ in thousands)

GROSS MARGIN:

Wholesale Margin $'s

Retail Margin $'s

Contract Manufacturing Margin $'s

Total Margin $'s

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

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

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

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

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

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

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

Nine Months Ended

September 30,

($ in thousands)

OPERATING EXPENSES:

General and administrative

Sales and marketing

Depreciation and amortization

Total Operating Expenses

% of Net Sales

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

Nine Months Ended

September 30,

($ in thousands)

INTEREST EXPENSE AND OTHER:

Interest expense

Other income, net

Total Interest Expense and Other

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

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

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

Nine Months Ended

September 30,

($ in thousands)

INCOME TAXES:

Income Tax Expense

Effective Tax Rate

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

The decrease in our effective tax rate in the first quarter of 2026 compared to the year ago period was primarily due to the mix of earnings between the United States and our international subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity are our income from operations, as well as access to the borrowing capacity under our ABL Facility.

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

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

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

As of March 31, 2026 , we maintained cash and cash equivalents of $1.7 million and had $48.5 million of availability un der our ABL Facility.

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

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

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

In addition to our ABL Facility with outstanding borrowings of $99.1 million as of March 31, 2026, we also have a Term Facility with outstanding borrowings of $24.7 million as of March 31, 2026 .

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

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

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

As of March 31, 2026, we were in compliance with such covenants and restrictions under the ABL Facility and Term Facility.

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

Our capital expenditures primarily relate to investments in information technology, molds and equipment associated with our manufacturing and distribution operations, merchandising fixtures, and projects related to our corporate offices.

In 2025, we purchased land for the future expansion of our distribution center in Logan, Ohio and as such it is possible that a significant portion of future capital expenditures may relate to this expansion.

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

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

As of March 31, 2026, our material cash requirements from known contractual obligations and commitments relate primarily to our long-term debt and operating leases commitments.

See Note 9 - Long-Term Debt to the Unaudited Condensed Consolidated Financial Statement for more information.

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

Nine Months Ended

September 30,

Three Months Ended

($ in millions)

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Operating Activities.

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

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

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

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

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

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

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

Net cash provided by operating activities was $1.9 million and $1.2 million for the three months ended March 31, 2026 and 2025, respectively.

Adjusting for noncash items, net income provided a cash in-flow of $5.5 million and $8.8 million for the three months ended March 31, 2026 and 2025 , respectively.

The net change in working capital and other assets and liabilities resulted in cash used by operating activities of $3.6 million and $7.6 million for the three months ended March 31, 2026 and 2025, respectively.

During the three months ended March 31, 2026, the net change in working capital was primarily impacted by an increase in accounts payable and a decrease in accrued expenses.

The increase in accounts payable resulted in a source of cash of $6.8 million and the decrease in accrued expenses resulted in a use of cash of $7.0 million.

The increase in accounts payable for the three months ended March 31, 2026 was a result of the timing of payments to suppliers and an increase in inventory purchases in the first quarter of 2026 compared to fourth quarter of 2025.

The decrease in accrued expenses for the three months ended March 31, 2026 was a result of the tariff reductions imposed during the first quarter of 2026.

During the three months ended March 31, 2025 , the net change in working capital was primarily impacted by an increase in inventory and accounts payable.

An increase in inventory resulted in a use of cash of $8.8 million and an increase in accounts payable resulted in a source of cash of $5.6 million.

The increase in inventory and accounts payable was the result of a strategic move to accelerate inventory receipts in March to avoid higher tariffs that did not go into effect until April 2025.

Investing Activities.

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

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

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

Net cash used in investing activities for the three months ended March 31, 2026 and 2025 was $1.1 million and $0.7 million, respectively.

The use of cash in both periods was a result of capital expenditures for our manufacturing operations and information technology.

Financing Activities.

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

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

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

Net cash used in financing activities for the three months ended March 31, 2026 and 2025 was $2.0 million and $1.7 million, respectively.

The net use of cash for both periods primarily related to the payment of dividends of $1.2 million for the three months ended March 31, 2026 and 2025 .

On February 24, 2026, we announced a share repurchase program of up to $7,500,000 of the Company's outstanding common stock, no par value per share.

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

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

Investors are cautioned that forward-looking statements involve risk and uncertainties including, without limitations, dependence on sales forecasts, changes in consumer demand, seasonality, impact of weather, competition, reliance on suppliers, risks inherent to international trade, increases or changes in duties and tariffs in countries of import and export, changing retail trends, the loss or disruption of our manufacturing and distribution operations, cybersecurity breaches or disruption of our digital systems, fluctuations in foreign currency exchange rates, economic changes, as well as other factors set forth under the caption “Item 1A, Risk Factors” in our Annual Report on Form 10- K for the year ended December 31, 2025 (filed March 11, 2026) and other factors detailed from time to time in our filings with the Securities and Exchange Commission.

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

3 unchanged sentences

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no material changes to our market risk as disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10- K for the year ended December 31, 2024 .

Not applicable to smaller reporting companies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis