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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-34382
ROCKY BRANDS, INC.
(Exact name of registrant as specified in its charter)
Ohio
No. 31-1364046
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
39 East Canal Street, Nelsonville, Ohio 45764
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (740) 753-1951
Securities registered pursuant to Section 12(b) of the Act:
Title of class
Trading symbol
Name of exchange on which registered
Common Stock – No Par Value
RCKY
NASDAQ
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange
Act.
☐ Large accelerated filer
☒ Accelerated filer
☐ Non-accelerated filer
☒ Smaller reporting company
☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant's Common Stock held by non-affiliates of the registrant on June 28, 2024, the last business day of the registrant's most recently
completed second fiscal quarter was $266,045,065, determined using a per share closing price of $36.96, as quoted by Nasdaq on that date.
There were 7,462,452 shares of the registrant's Common Stock outstanding on February 28, 2025.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the 2025 Annual Meeting of Shareholders are incorporated by reference in Part III.
Table of Contents
TABLE OF CONTENTS
Page
PART I
Item 1.
Business
2
Item 1A.
Risk Factors
9
Item 1B.
Unresolved Staff Comments
15
Item 1C.
Cybersecurity
15
Item 2.
Properties
16
Item 3.
Legal Proceedings
16
Item 4.
Mine Safety Disclosures
16
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
17
Item 6.
[Reserved]
18
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
18
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
25
Item 8.
Financial Statements and Supplementary Data
26
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
52
Item 9A.
Controls and Procedures
52
Item 9B.
Other Information
54
Item 9C.
Disclosures Regarding Foreign Jurisdictions that Prevent Inspections
54
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
54
Item 11.
Executive Compensation
54
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
54
Item 13.
Certain Relationships and Related Transactions, and Director Independence
54
Item 14.
Principal Accounting Fees and Services
54
PART IV
Item 15.
Exhibits and Financial Statement Schedules
55
Item 16.
Form 10-K Summary
57
SIGNATURES
58
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This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section
27A of the Securities Act of 1933, as amended. The words "anticipate," "believe," "expect," "estimate" and "project" and similar words and expressions identify forward-
looking statements which speak only as of the date hereof. Investors are cautioned that such statements involve risks and uncertainties that could cause actual results to
differ materially from historical or anticipated results due to many factors, including, but not limited to, the factors discussed in "Item 1A. Risk Factors." The Company
undertakes no obligation to publicly update or revise any forward-looking statements.
PART I
ITEM 1. BUSINESS.
All references to "we," "us," "our," "Rocky Brands," or the "Company" in this Annual Report on Form 10-K mean Rocky Brands, Inc. and our subsidiaries.
We are a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names, including The
Original Muck Boot Company ("Muck"), Rocky, Georgia Boot, Durango, Lehigh, XTRATUF, Ranger and the licensed brand Michelin. Our brands have a long history of
representing high quality, comfortable, functional, and durable footwear and our products are organized around six target markets: work, outdoor, western, commercial
military, duty, and military. Our footwear products incorporate varying features and are positioned across a range of suggested retail price points from $48.00 for our value
priced products to $655.00 for our premium products. In addition, as part of our strategy of outfitting consumers from head-to-toe, we market complementary branded
apparel and accessories that we believe leverage the strength and positioning of each of our brands.
Segment Reporting and each of our reporting segments continue to employ consistent accounting policies. See Note 19 - Segment Information of our Consolidated
Financial Statements for further information.
The Company's portfolio of brands is organized into the following reportable segments, in which our products are distributed:
●
Wholesale
●
Retail
●
Contract Manufacturing
Wholesale
We distribute Muck, Rocky, Georgia Boot, Durango, Lehigh, XTRATUF, Ranger and Michelin products through a wide range of Wholesale distribution channels
throughout the world. 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. As of December 31, 2024 , our products were
offered for sale at over 10,000 retail locations in the U.S. and Canada as well as several international markets, such as Europe.
We sell to wholesale accounts in the U.S. through a dedicated in-house sales team, and exclusive, as well as independent, sales representatives who carry our branded
products and other non-competing products. Our sales force is organized around major accounts, including Boot Barn, Tractor Supply Company, Amazon and Bass Pro, and
around our target markets: work, outdoor, western, commercial military, duty and military. Our sales force is also organized around brands, regions and customers to target a
broad range of distribution channels. All our salespeople actively call on their retail customer base to educate them on the quality, comfort, technical features and breadth of
our product lines and to ensure that our products are displayed effectively at retail locations.
Our Wholesale distribution channels vary by market:
●
Our work-related products are sold primarily through work-related retailers, farm and ranch stores, specialty safety stores, independent shoe stores, hardware stores
and online retailers;
●
Our outdoor products are sold primarily through sporting goods stores, outdoor specialty stores, online retailers, catalogs and mass merchants;
●
Our western products are sold through western stores, work stores, specialty farm and ranch stores, online retailers and fashion-oriented footwear retailers;
●
Our commercial military products are sold primarily through base exchanges, such as the Army Air Force Exchange Store (AAFES), and consumer e-Commerce
websites; and
●
Our duty products are sold primarily through uniform stores, catalog specialists and online retailers.
Retail
We market products directly to consumers through three retail strategies:
●
Lehigh business-to-business including direct sales and through our CustomFit websites;
●
Consumer e-Commerce websites (B2C) and third-party marketplaces; and
●
Brick and Mortar Stores, which include our outdoor gear and retail store.
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Lehigh
We sell our Lehigh brand of safety shoes along with in-house and third-party branded work product to our business customers directly through our CustomFit websites, that
are tailored to the specific needs of our customers. Our customers' employees order directly through their employers' established CustomFit website, and the footwear is
delivered directly to the customer via a common freight carrier.
Websites
We sell our product lines on our websites at muckbootcompany.com, rockyboots.com, georgiaboot.com, durangoboot.com, lehighoutfitters.com, lehighsafetyshoes.com,
xtratuf.com, and slipgrips.com, as well as through online third-party marketplaces. We believe that our internet presence allows us to showcase the breadth and depth of our
product lines in each of our target markets and enables us to educate our consumers about the unique technical features of our products.
Outdoor Gear and Retail Store
We operate the Rocky Outdoor Gear Store in Nelsonville, Ohio. Our outdoor gear store primarily sells first quality current and discontinued products in addition to a limited
amount of factory damaged goods. Related products from other manufacturers are also sold in the store. Our outdoor gear store allows us to showcase the breadth of our
product lines as well as to cost-effectively sell slow-moving inventory. Our outdoor gear store also provides an opportunity to interact with consumers to better understand
their needs. Additionally, Lehigh has one retail store located at the Puget Sound Naval Base where we sell select product directly to customers.
Contract Manufacturing
While we are focused on continuing to build our Wholesale and Retail business, we also actively bid, from time to time, on eligible footwear contracts with the U.S.
Military. In addition to contracts with the U.S. Military, we bid on private label contracts. Our sales under such contracts are dependent on us winning the bids for these
contracts.
In 2023, we were awarded a new multi-year contract with the U.S. Military pursuant to which we will produce and ship a minimum number of pairs to the U.S. Military
through 2026, with the option to extend. The first quarter of 2024 was the first full quarter, in which shipments were made to the U.S. Military under this multi-year
contract. We expect to continue to actively bid on U.S. Military contracts.
Brands and Product Lines
Our products are marketed under eight well-recognized, proprietary brands: Muck, Rocky, Georgia Boot, Durango, Lehigh, XTRATUF and Ranger, in addition to the
licensed brand Michelin.
Muck
Muck was founded in 1999 and has pioneered the premium rubber and neoprene boot category by delivering high quality, innovative, weatherproof and comfortable
products. Our current line of Muck footwear products is offered at suggested U.S. retail price points ranging from $55.00 to $265.00 . Through widespread consumer
validation in the farm, agriculture, hunt and equestrian markets, Muck has been able to expand to new markets such as outdoor, gardening, industrial and general work, as
well as to new international regions such as the U.K., Norway and Germany to reach new consumers. Both new and existing consumer groups have welcomed line
extensions from the brand as the total catalog expands beyond its core offering into premium leather and other new footwear categories.
Rocky
Rocky, established in 1979, is our premium priced line of branded footwear, apparel and accessories. We currently design Rocky products for each of our six target markets
and offer our products at a range of suggested U.S. retail price points: $80.00 to $415.00 for our footwear products; and $18.00 to $160.00 for our apparel and
accessory lines.
The Rocky brand originally targeted outdoor enthusiasts, particularly hunters, and has since become a market leader in the hunting and rugged casual category. In 2002, we
also extended into hunting apparel, including jackets, pants, gloves and caps. Our Rocky products for hunters and other outdoor enthusiasts are designed for specific
weather conditions and the diverse terrains of North America. These products incorporate a range of technical features and designs such as waterproof breathable fabric, 3M
Thinsulate insulation, nylon Cordura fabric and camouflaged uppers featuring either Venator, Mossy Oak or Realtree patterns. We use rugged outsoles made by industry
leaders like Vibram, as well as our own proprietary design features, to make the products durable and easy to wear.
In 2002, we introduced Rocky work footwear designed for varying weather conditions or difficult terrain, particularly for people who make their living outdoors such as
those in lumber, forestry, construction and oil & gas occupations. These products typically include many of the proprietary features and technologies that we incorporate in
our hunting and outdoor products.
We have also introduced western influenced work boots for farmers and ranchers. Most of these products are waterproof, come in soft toe and safety toe options and utilize
our proprietary comfort systems.
Georgia Boot
Georgia Boot was launched in 1937 and is our moderately priced, high-quality line of work and rugged lifestyle footwear. Georgia Boot footwear is sold at suggested U.S.
retail price points ranging from $109.00 to $280.00 . This line of products primarily targets blue collar workers across various trades, including construction, logging,
warehousing, landscaping and farming. Many of our boots incorporate safety toes and non-slip outsoles to prevent injuries in the workplace. We also offer other more
specialized protective features, such as puncture resistance, as well as metatarsal guards that protect wearers’ feet from heavy objects. Each boot is designed to meet the
demands of specific trades while also integrating cutting-edge technology and materials to create the most comfortable and durable footwear that is tough enough to handle
the rigors found on job sites across America.
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Durango
Durango Boots was established in 1966 and manufactures premium western footwear for men, women, and kids. For over half a century, Durango has earned a reputation
for building authentic western boots using exceptional materials and innovative constructions. Our current line of Durango products is offered at suggested U.S. retail price
points ranging from $120.00 to $655.00. Our brand portfolio categories include work-western, farm and ranch, western-performance, premium exotics, fashion-forward and
casual wear.
Many of our western products are marketed to core western and aspirational western consumers who have an affinity and loyalty to the western lifestyle. Such products
include high-performance technologies that include our patented Dually Shank System, which provides twice the torsion stability and midfoot support and various footbeds
that offer flexibility, comfort, and support for immediate gratification.
Lehigh
The Lehigh brand was established in 1922 as a high-quality line of occupational safety footwear that later expanded into a full-service program offering. While still
manufacturing and selling branded core product, the brand primarily focuses on providing managed programs to companies that require and provide a subsidy to their
employees to wear safety footwear. Most of the footwear incorporates a protective toe and can include a metatarsal guard, puncture-resistant, slip-resistant outsole and
special materials to combat caustic substances. Lehigh offers an extensive selection of styles to fit any work environment. Lehigh’s unique business model provides
companies with customizations to fit their needs and digital tools for greater visibility and control of their program. As the established leader in the industry, Lehigh
introduced and utilizes 3DFit technology and wellness foot products as a way to elevate safety and improve productivity. By providing an accurate fit, body aligning
orthotics and anti-fatigue compression, Lehigh helps companies go beyond accident protection to full body wellness protection. Lehigh provides and improves safety and
health to a wide range of customer accounts in the industrial, distribution, hospitality and healthcare industries.
The Lehigh brand line of safety shoes has suggested U.S. retail price points ranging from $91.00 to $295.00 .
XTRATUF
Since the early 1950s, XTRATUF has been a leading outfitter in the commercial, sport, and recreational fishing market, having provided fishermen with capable,
comfortable and reliable footwear for use in the harshest conditions. With roots in Alaska and continued widespread use by those who live there, the XTRATUF brand has
been able to expand to other regions throughout North America and most recently in the U.K. and Japan. Fueled by the strong growth in the outdoor market, particularly
white boat lifestyle and sport fishing, the brand has been adopted by non-fishermen seeking quality, functional footwear. Our current line of XTRATUF footwear products is
offered at suggested U.S. retail price points ranging from $50.00 to $195.00 .
Ranger
Ranger primarily serves the outdoor recreational market and offers a range of pac-boots that are built for wet and cold weather that provide exceptional comfort and
function at a value price. Our current line of Ranger footwear products is offered at suggested U.S. retail price points ranging from $48.00 to $100.00 .
Michelin
Michelin is a premier price point line of work footwear targeting specific industrial professions, primarily indoor professions. The license to design, develop and
manufacture footwear under the Michelin name was secured in 2006. Suggested U.S. retail prices for the Michelin brand are from $210.00 to $237.00 . The license
agreement for the Michelin brand expires on December 31, 2025, with the option to renew.
Product Lines
Our brands are organized into six distinct product lines, which consist of high-quality products that target the following markets:
●
Work. Our work product line consists of footwear and apparel marketed to industrial and construction workers, as well as workers in the hospitality industry, such
as restaurants or hotels and those who partake in farm and ranch work. All of our work products are specially designed to be comfortable, incorporate safety
features for specific work environments or tasks and meet applicable federal and other standards for safety. This category includes products such as safety toe
footwear for industrial and construction workers and non-slip footwear for hospitality workers.
●
Outdoor. Our outdoor product line consists of footwear, apparel and accessory items marketed to outdoor enthusiasts who spend time actively engaged in activities
such as hunting, fishing, camping and hiking. Our consumers demand high quality, durable products that incorporate the highest level of comfort and the most
advanced technical features, and we are committed to ensuring our products reflect the most advanced designs, features and materials available in the third-party
marketplace. Our outdoor product lines consist of all-season sport/hunting and fishing footwear, apparel and accessories that are typically waterproof and insulated
and are designed to keep outdoor enthusiasts comfortable on rugged terrain or in extreme weather conditions.
●
Western. Our western product line currently consists of authentic footwear products marketed to farmers and ranchers who generally live in rural communities in
North America. In addition, we have western styles that are marketed for fashion and casual wear.
●
Commercial Military. Our commercial military product line consists of footwear products marketed to military personnel as a substitute for the government issued
military boots. Our commercial military boots are designed to be comfortable, lightweight, and durable and are marketed under the Rocky brand name.
●
Duty. Our duty product line consists of footwear products marketed to law enforcement, security personnel and postal employees who are required to spend a
majority of their time at work on their feet. All of our duty footwear styles are designed to be comfortable, flexible, lightweight, slip resistant and durable. Duty
footwear is generally designed to fit as part of a uniform and typically incorporates stylistic features, such as black leather uppers in addition to the comfort features
that are incorporated in all of our footwear products.
●
Military. Our military product line consists of footwear products designed specifically for U.S. Military personnel. These footwear products are designed and
manufactured to meet rigorous specification requirements, which include lightweight, durable, waterproof footwear products manufactured in the U.S. The U.S.
Military products are marketed under the Rocky brand name.
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Competitive Strengths
Our competitive strengths include:
●
Strong portfolio of brands. We believe the Muck, Rocky, Georgia Boot, Durango, Lehigh, XTRATUF, Ranger and Michelin brands are well recognized and
established names that have a reputation for performance, quality and comfort in the markets they serve: work, outdoor, western, commercial military, duty,
and military. We plan to continue strengthening these brands through product innovation in existing footwear markets, by extending certain of these brands into our
other target markets and by introducing complementary apparel and accessories under our own brands.
●
Commitment to product innovation. We believe a critical component of our success in the third-party marketplace has been a result of our continued commitment to
product innovation. Our consumers demand high quality, durable products that incorporate the highest level of comfort and the most advanced technical features
and designs. We have a dedicated group of product design and development professionals, including well recognized experts in the footwear and apparel industries,
who continually interact with consumers to better understand their needs and are committed to ensuring our products reflect the most advanced designs, features
and materials available in the third-party marketplace.
●
Long-term retailer relationships. We believe that our long history of designing, manufacturing and marketing premium quality, branded footwear has enabled us to
develop strong relationships with our retailers in each of our distribution channels. We reinforce these relationships by continuing to offer innovative footwear
products, by continuing to meet the individual needs of each of our retailers and by working with our retailers to improve the visual merchandising of our products
in their stores. We believe that strengthening our relationships with retailers will allow us to increase our presence through additional store locations and expanded
shelf space, improve our market position in a consolidating retail environment and enable us to better understand and meet the evolving needs of both our retailers
and consumers.
●
Diverse product sourcing and manufacturing capabilities. We believe our strategy of utilizing both company operated and third-party facilities for the sourcing of
our products offers several advantages. Operating our own facilities significantly improves our knowledge of the entire production process, which allows us to
more efficiently source product from third parties that is of the highest quality and at the lowest cost available. We intend to continue to source a higher proportion
of our products from third-party manufacturers, which we believe will enable us to obtain high quality products at lower costs per unit.
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Growth Strategy
We intend to increase our sales through the following strategies:
●
Expand into new target markets under existing brands. We believe there is significant opportunity to extend certain of our brands into our other target markets. We
intend to continue to introduce products across varying feature sets and price points in order to meet the needs of our customers.
●
Cross-sell our brands to our retailers. We believe that many retailers of our brands target consumers with similar characteristics and, as a result, we believe there is
significant opportunity to offer each of our retailers a broader assortment of footwear and apparel that target multiple markets and span a range of feature sets and
price points.
●
Expand business internationally. We intend to extend certain of our brands into international markets. We believe this is a significant opportunity because of the
long history and authentic heritage of these brands. We intend to grow our business internationally through a network of distributors.
●
Grow our e-Commerce business. We intend to drive business to our branded e-Commerce websites as well as third-party marketplace platforms. We believe there is
an opportunity to capitalize on the changes in the market to online shopping as we focus advertising efforts and maximize our distribution capabilities.
●
Increases in our Lehigh business. We believe that our business-to-business CustomFit platform has ample opportunity to grow as we continue to pursue large
manufacturers, distributors, and other companies who are reliant on safety footwear programs. We feel that diversifying our product lines and continuing to provide
an easy, no hassle approach to purchasing will allow us to expand within the market.
●
Acquire or develop new brands. We intend to continue to acquire or develop new brands that are complementary to our portfolio and could leverage our operational
infrastructure and distribution network.
Marketing and Advertising
We believe that our brands have a reputation for high quality, comfort, functionality and durability built through their long history in the markets they serve. To further
increase the strength and awareness of our brands, we have developed comprehensive marketing and advertising programs to gain national exposure and expand brand
awareness for each of our brands in their target markets.
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We have focused the majority of our advertising efforts on both digital advertising and consumer advertising in support of our retail partners. Digital advertising includes
online brand level marketing, search engine pay-per-click, retargeting and social media targeting. A key component to supporting our retail partners includes in-store point
of purchase materials that add a dramatic focus to our brands and the products our retail partners carry. We also advertise through targeted national and local cable programs,
radio advertisements and print publications aimed at audiences that share the demographic profile of our typical customers. In addition, we promote through event
sponsorships which provide significant national exposure for all of our brands as well as a direct connection to our target consumer. Our print advertisements and television
commercials emphasize the technical features of our products as well as their high quality, comfort, functionality and durability.
We also support independent dealers by listing their locations in our national print advertisements. In addition to our national advertising campaigns, we have developed
attractive merchandising displays and store-in-store concept fixturing that are available to our retailers who purchase the breadth of our product lines. We also attend
numerous tradeshows which allow us to showcase our entire product line to retail buyers and have historically been an important source of new accounts.
Product Design and Development
We believe that product innovation is a key competitive advantage for us in each of our markets. Our goal in product design and development is to continue to create and
introduce new and innovative footwear and apparel products that combine our standards of quality, functionality and comfort and that meet the changing needs of our
retailers and consumers. Our product design and development process is highly collaborative and is typically initiated both internally by our development staff and
externally by our retailers and suppliers, whose employees are generally active users of our products and understand the needs of our consumers. Our product design and
development personnel, marketing personnel and sales representatives work closely together to identify opportunities for new styles, patterns, design improvements and
newer, more advanced materials. We have a dedicated group of product design and development professionals, some of whom are well recognized experts in the footwear
and apparel industries, who continually interact with consumers to better understand their needs and are committed to ensuring our products reflect the most advanced
designs, features and materials available in the third-party marketplace.
Manufacturing and Sourcing
We manufacture footwear in facilities that we own and operate in the Dominican Republic, Puerto Rico, and Chuzhou, China and source footwear, apparel and accessories
from third-party facilities in China, Vietnam, India, the Dominican Republic and Mexico. We do not have long-term contracts with any of our third-party manufacturers. We
believe that operating our own facilities significantly improves our knowledge of the entire raw material sourcing and manufacturing process, which enables us to more
efficiently source finished goods from third parties that are of the highest quality and at the lowest cost available, as well as reduce our lead times. In addition, our Puerto
Rico facility allows us to produce footwear for the U.S. Military and other commercial businesses that require production by a U.S. manufacturer. Sourcing products from
offshore third-party facilities generally enables us to lower our costs per unit while maintaining high product quality and limits the capital investment required to establish
and maintain company operated manufacturing facilities. Because quality is an important part of our value proposition to our retailers and consumers, we source products
from manufacturers who have demonstrated the intent and ability to maintain the high quality that has become associated with our brands.
Quality control is stressed at every stage of the manufacturing process and is monitored by trained quality assurance personnel at each of our manufacturing facilities,
including our third-party factories. In addition, we utilize a team of procurement, quality control and logistics employees in our China office and a third-party quality control
service provider to visit factories to conduct quality control reviews of raw materials, work in process inventory and finished goods. We also utilize quality control
personnel at our finished goods distribution facilities to conduct quality control testing on incoming sourced finished goods and raw materials and inspect random samples
from our finished goods inventory from each of our manufacturing facilities to ensure that all items meet our high-quality standards.
Foreign Operations and Sales Outside of the U.S.
Our products are primarily distributed in the U.S., Canada, the U.K. and other international markets, mainly in Europe. We ship our products from our finished goods
distribution facilities located in Ohio and Nevada. Certain of our retailers receive shipments directly from our manufacturing sources, including all of our U.S. Military
sales, which are shipped directly from our manufacturing facility in Puerto Rico. Net sales to foreign countries represented approximately 3.2% of net sales in 2024
and 5.1% of net sales in 2023.
As previously mentioned, we also maintain manufacturing facilities that we operate in the Dominican Republic and Chuzhou, China. In addition, we utilize an office in
China to support our contract manufacturers.
The net book value of fixed assets located outside of the U.S. totaled $11.2 million at December 31, 2024, of which approximately $3.7 million resides in the Dominican
Republic and approximately $7.5 million resides in China.
Resources and Suppliers
We purchase raw materials from sources worldwide. We do not have long-term supply contracts for the purchase of our raw materials. The principal raw materials used in
the production of our products, in terms of dollar value, are leather, Cordura nylon fabric and soling materials. We believe these materials will continue to be available from
our current suppliers. However, in the event these materials are not available from our current suppliers, we believe these products, or similar products, would be available
from alternative sources.
Seasonality and Weather
Historically, we have experienced significant seasonal fluctuations in our business as many of our footwear products are used by consumers in adverse weather conditions.
In order to meet these demands, we must manufacture and source footwear year-round to be in a position to ship advance and at-once orders for these products during the
last two quarters of each year. Accordingly, average inventory levels have been highest during the second and third quarters of each year and sales have been highest in the
last two quarters of the year. In addition, mild or dry weather conditions historically have had a material adverse effect on sales of our outdoor products, particularly if they
occurred in broad geographical areas during late fall or early winter.
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Backlog
The dollar amount of our order backlog as of any date may not be indicative of actual future shipments and, accordingly, is not material to an understanding of our business
taken as a whole.
Intellectual Property
We rely on a combination of our trademarks, patents, and other intellectual property rights, as well as contractual provisions to protect our brands, product designs,
technology, marketing materials, and other proprietary research and development, although no such methods can afford complete protection. We own numerous design and
utility patents for footwear and footwear components (such as insoles and outsoles) in the U.S. and in several countries where our products are sold or manufactured,
including China. We own numerous U.S. and foreign registrations for the patents and trademarks used in our business, including our major brands Muck, Rocky, Georgia
Boot, Durango, Lehigh, XTRATUF, and Ranger. In addition, we license the use of third-party trademarks, including Michelin, in order to market our products.
Our license with Michelin Lifestyle Limited permits us to use the Michelin brand and related marks on our products. Our license agreement with Michelin Lifestyle Limited
to use the Michelin name expires on December 31, 2025, with the option to renew.
In the U.S. and China, our design patents are generally in effect for 15 years from the date of issuance. Our utility patents are generally in effect for 20 years from the date
of the filing of the patent application. Our trademarks are generally valid as long as they are in use and their registrations are properly maintained.
While we have an active program to protect our intellectual property by filing for patents and trademark registrations, we do not believe that our overall business is
materially dependent on any individual patent or trademark. We are not aware of any material infringement of our intellectual property rights or that we are infringing any
intellectual property rights owned by third parties. Moreover, we are not aware of any material conflicts concerning our trademarks or those owned by others. We actively
enforce our trademarks and patents, and pursue those who infringe upon them, whether domestically or internationally, as we deem appropriate.
Competition
We operate in a very competitive environment. Product function, design, comfort, quality, technological and material improvements, brand awareness, timeliness of product
delivery and pricing are all important elements of competition in the markets for our products. We believe that the strength of our brands, the quality of our products and our
long-term relationships with a broad range of retailers allow us to compete effectively in the footwear and apparel markets that we serve. However, we compete with
footwear and apparel companies that have greater financial, marketing, distribution and manufacturing resources than we do. In addition, many of these competitors have
strong brand name recognition in the markets they serve.
The footwear and apparel industry is also subject to rapid changes in consumer preferences. Some of our product lines are susceptible to changes in both technical
innovation and fashion trends. Therefore, the success of these products and styles are more dependent on our ability to anticipate and respond to changing product, material
and design innovations, as well as fashion trends and consumer demands in a timely manner. Our inability or failure to do so could adversely affect consumer acceptance of
these product lines and styles and could have a material adverse effect on our business, financial condition and results of operations.
Human Capital
At December 31, 2024, we had approximately 2,535 employees of which approximately 2,530 are full time employees. Approximately 1,690 of our employees work in our
manufacturing facilities in the Dominican Republic, Puerto Rico and Chuzhou, China. We believe our relations with our employees are in good standing.
Employee Well Being
Founded from the humble beginnings of a small, family owned business, our employees have always been the key to making our Company successful. As such, we believe
that fostering an environment that advocates for all areas of employee health (including physical, mental and emotional) is crucial. We offer a tuition assistance
reimbursement program and an employee assistance program, which can assist employees in various aspects of their personal life and overall well-being. We also encourage
our employees to take continuing education classes that will aid in their day-to-day work responsibilities and we promote a healthy lifestyle through monthly newsletters
and various health focused events throughout the year.
The health and safety of our employees is one of our highest priorities. Our Health and Wellness Committee strives to educate our employees on the importance of taking
care of yourself both inside and outside the workplace. Throughout the year we contract with various health and wellness professionals outside of our organization to hold
educational sessions for our employees both in-person and virtually. Nothing is more fundamental than providing our employees with an environment where they feel safe,
secure and supported.
Talent Recruitment, Retention and Development
Our employee culture is built on our core values of integrity, responsibility and humility. The ability to attract, retain and develop talented employees is crucial to our long-
term success. We focus on attracting, developing and retaining highly talented individuals through practices that promote our core values. We recruit through a variety of
outreach methods including our rockybrands.com/careers website and other online platforms, such as LinkedIn, college recruitment efforts, network relationships and direct
communication with career centers. When new employment opportunities within our Company arise, we send out internal communications to inform all associates of new
openings. We review internal applications for consideration before considering external applicants.
We strive to maximize engagement with our employees in a variety of ways, including scheduled meetings between employees and executive leadership within the first few
months of employment, face-to-face and virtual interviews with employees following 60 days and one year of employment, annual performance evaluations, regular check-
in surveys and exit surveys. We also rely on our management team to influence growth and develop a path for success with employees on each team within our organization.
Quarterly, our CEO and COO hold all-employee communication meetings to keep our employees apprised of recent happenings within our organization and to allow
employees a forum for their voice to be heard.
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We are committed to having a workforce which reflects a wide range of perspectives as well as varied professional and educational backgrounds. We strive to provide an
environment that allows our employees to bring their authentic selves to work every day, and we are committed to fostering a workplace that is free of discrimination,
harassment, and which promotes allyship, advocacy and an overall sense of belonging.
Compensation and Benefits
Our compensation structure is set up to reward employees for performance. We regularly evaluate employee compensation to ensure it is competitive and in-line with
market benchmarks and to reward employees who perform at a high level. We offer comprehensive benefit programs to our employees including medical, dental and vision.
We also provide a 401(k) match and safe harbor contribution, paid time off, including maternal and paternal leave, life insurance and long-term and short-term disability.
Available Information
As required by the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we file annual, quarterly and current reports, proxy statements and other information
with the Securities and Exchange Commission ("SEC"). The SEC maintains a website that contains information about issuers, like us, who file electronic reports with the
SEC. The address of the SEC’s website is www.sec.gov. In addition, we make available free of charge on our corporate website, www.rockybrands.com, our annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Exchange Act as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. Except as specifically incorporated by
reference into this Annual Report on Form 10-K, information on those websites is not part of this report.
ITEM 1A. RISK FACTORS.
An investment in our common stock is subject to certain risks inherent in our business. Before making an investment decision, investors should carefully consider the risks
and uncertainties described below, together with all of the other information included or incorporated by reference in this Annual Report on Form 10-K. If any of the
following risks occur, our business, results of operations, financial condition and cash flows could be materially and adversely affected. These described risks are not the
only risks facing us. Additional risks and uncertainties not known to us or that we deem to be immaterial also may materially adversely affect our business, results of
operations, financial condition and cash flows. If any of these risks were to materialize, the value of our common stock could decline significantly.
Business Risks
Expanding our brands into new footwear and apparel markets may be difficult and expensive, and if we are unable to successfully continue such expansion, our brands
may be adversely affected, and we may not achieve our planned sales growth.
Our growth strategy is founded substantially on the expansion of our brands into new footwear and apparel markets. New products that we introduce may not be successful
with consumers or one or more of our brands may fall out of favor with consumers. If we are unable to anticipate, identify or react appropriately to changes in consumer
preferences, we may not grow as fast as we plan to grow. This could cause our sales to decline, brand image to suffer and operating performance to deteriorate.
Furthermore, achieving market acceptance for new products will likely require us to exert substantial product development and marketing efforts, which could result in a
material increase in our expenses, and there can be no assurance that we will have the resources necessary to undertake such efforts. Material increases in our expenses
could adversely impact our results of operations and cash flows.
We may also encounter difficulties in producing new products that we did not anticipate during the development stage. Our development schedules for new products are
difficult to predict and are subject to change as a result of shifting priorities in response to consumer preferences and competing products. If we are not able to efficiently
manufacture newly-developed products in quantities sufficient to support retail distribution, we may not be able to recoup our investment in the development of new
products. Failure to gain market acceptance for new products that we introduce could impede our growth, reduce our profits, adversely affect the image of our brands, erode
our competitive position and result in long term harm to our business.
A majority of our products are produced outside the continental U.S. where we are subject to the risks of international commerce and other international conditions.
The majority of our products are produced in China, the Dominican Republic, Puerto Rico, Vietnam, India, and Mexico. Therefore, our business is subject to certain risks of
doing business offshore including:
●
the imposition of additional U.S. legislation and regulations relating to imports, including quotas, duties, tariffs, taxes or other charges or restrictions, including
recent tariffs on goods from China;
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foreign governmental regulation and taxation, including tariffs, import and export controls and other non-tariff barriers;
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fluctuations in foreign exchange rates;
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changes in economic conditions, including expropriation and nationalization;
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transportation conditions and costs in the Pacific and Caribbean;
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changes in the political stability of these countries;
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labor disputes and other work stoppages or interruptions;
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changes in relationships between the U.S. and these countries; and
●
the occurrence of contagious disease or illness.
Changes in any of these factors could materially increase our costs of products or cause us to experience delays and we may not be able to recover all of our cost increases
or missed sales. If any of these factors were to render the conduct of business in these countries undesirable or impracticable, we would have to manufacture or source our
products elsewhere. There can be no assurance that additional sources or products would be available to us or, if available, that these sources could be relied on to provide
product at terms favorable to us or that is of the same quality. The occurrence of any of these developments could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
Our success depends on our ability to anticipate consumer trends.
Demand for our products may be adversely affected by changing consumer trends. Our future success will depend upon our ability to anticipate and respond to changing
consumer preferences and technical design or material developments in a timely manner. The failure to adequately anticipate or respond to these changes could have a
material adverse effect on our business, financial condition, results of operations and cash flows.
We depend on a limited number of suppliers for key production materials, and disruptions in the supply of such materials could interrupt product manufacturing and
increase product costs.
We purchase raw materials from a number of domestic and foreign sources. We do not have long-term supply contracts for the purchase of our raw materials. The principal
raw materials used in the production of our footwear, in terms of dollar value, are leather, Cordura nylon fabric and soling materials. Availability or change in the prices of
our raw materials could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our ability to import products in a timely and cost-effective manner may also be affected by conditions at ports or issues that otherwise affect transportation and
warehousing providers, such as fluctuations in freight costs, port and shipping capacity, labor disputes, public health crisis, pandemic, natural disaster, or severe weather due
to climate change. These issues have in the past and may in the future delay importation of products or require us to locate alternative ports or warehousing providers to
avoid disruption to customers. These alternatives may not be available on short notice or could result in higher costs, which could have an adverse impact on our business
and financial condition.
The emergence or persistence of geopolitical instability may disrupt the global economy, the impacts of which may negatively impact our business, financial, condition
and results of operations.
The emergence or persistence of geopolitical instability creates risks for disruptions in the global economy which may negatively impact our business, financial condition,
and results of operations. Factors such as new tariffs proposed by the U.S. in various international markets, including China, shipping disruptions in the Red Sea,
uncertainties related to the political environment in China, and ongoing conflicts such as the war between Russia and Ukraine have adversely affected the global economy
and contributed to geopolitical instability. While we have managed to navigate impacts from these conflicts thus far, the ongoing instability resulting from these disruptions
or other future disruptions could potentially harm our business, financial condition, results of operations, supply chain, intangible assets, partners, customers, or employees,
should tensions escalate. Moreover, an escalation of geopolitical tensions may lead to broader impacts, including but not limited to cyberattacks, supply chain and logistics
disruptions, lower consumer demand, and changes to foreign exchange rates and interest rates. Any of these factors may adversely affect our business and supply chain.
Our outdoor and insulated products are seasonal and sales of such products are sensitive to weather conditions.
We have historically experienced significant seasonal fluctuations in our business because we derive a significant portion of our revenues from sales of our outdoor
products. Many of our outdoor products are used by consumers in cold or wet weather. As a result, a majority of orders for these products are placed by our retailers in
January through April for delivery in July through October. In order to meet demand, we must manufacture and source outdoor footwear year-round to be in a position to
ship advance orders for these products during the last two quarters of each year. Accordingly, average inventory levels have been highest during the second and third
quarters of each year and sales have been highest in the last two quarters of each year. There is no assurance that we will have either sufficient inventory to satisfy demand
in any particular quarter or have sufficient demand to sell substantially all of our inventory without significant markdowns. Mild or dry weather has in the past and may in
the future have a material adverse effect on sales of our products, particularly if mild or dry weather conditions occur in broad geographical areas during late fall or early
winter. Climate change may exacerbate these conditions.
Our business could suffer if our third-party manufacturers violate labor, environmental or other applicable laws or fail to conform to generally accepted ethical
standards.
We require our third-party manufacturers to meet our standards for working conditions and other matters before we are willing to place business with them. As a result, we
may not always obtain the lowest cost production. Moreover, we do not control our third-party manufacturers or their respective business practices. If one of our third-party
manufacturers violates generally accepted labor standards by, for example, using forced or indentured labor or child labor, failing to pay compensation in accordance with
local law, failing to operate its factories in compliance with local safety regulations or diverging from other labor practices generally accepted as ethical, we likely would
cease dealing with that manufacturer, and we could suffer an interruption in our product supply. Similarly, if one or more of our third-party manufacturers violate applicable
environmental or other laws and regulations, we could suffer an interruption in our product supply. In addition, such actions by a manufacturer could result in negative
publicity and may damage our reputation and the value of our brand and discourage retail customers and consumers from buying our products.
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The growth of our business will be dependent upon the availability of adequate capital.
The growth of our business will depend on the availability of adequate capital, which in turn will depend largely on cash flow generated by our business and the availability
of equity and debt financing. We cannot assure that our operations will generate positive cash flow or that we will be able to obtain equity or debt financing on acceptable
terms or at all. Our credit facilities contain provisions that restrict our ability to incur additional indebtedness or make substantial asset sales that might otherwise be used to
finance our expansion. Security interests in substantially all of our assets, which may further limit our access to certain capital markets or lending sources, secure our
obligations under our credit facilities. Moreover, the actual availability of funds under our credit facilities is limited to specified percentages of our eligible inventory and
accounts receivable. Accordingly, opportunities for increasing our cash on hand through sales of inventory would be partially offset by reduced availability under our credit
facilities. As a result, we may not be able to finance our current expansion plans.
Our current level of indebtedness could adversely affect our business by increasing our borrowing costs and decreasing our overall business flexibility.
Our current level of indebtedness could adversely affect our business by increasing our borrowing costs and decreasing our overall business flexibility. We have debt
outstanding under two credit facilities, which contain customary restrictive covenants imposing operating and financial restrictions, including restrictions that may limit our
ability to engage in certain actions that may be in our long-term best interests.
We must comply with the restrictive covenants contained in our credit facilities.
Our credit facilities require us to comply with certain financial restrictive covenants that impose restrictions on our operations, including our ability to incur additional
indebtedness, make investments of other restricted payments, sell or otherwise dispose of assets and engage in other activities. Any failure by us to comply with the
restrictive covenants could result in an event of default under those borrowing arrangements, in which case the lenders could elect to declare all amounts outstanding
thereunder to be due and payable, which could have a material adverse effect on our financial condition. Our credit facilities contain restrictive covenants which requires us
to maintain a minimum fixed charge coverage ratio.
Interest rate increases could adversely affect our financial results.
An increase in interest rates under our credit facilities would adversely affect our financial results, as our loan agreements provide for adjustments in our interest rates based
on changes to the Secured Overnight Financing Rate (SOFR) and/or the prime rate.
We face intense competition, including competition from companies with significantly greater resources than ours, and if we are unable to compete effectively with
these companies, our market share may decline and our business could be harmed.
The footwear and apparel industries are intensely competitive, and we expect competition to increase in the future. A number of our competitors have significantly greater
financial, technological, engineering, manufacturing, marketing and distribution resources than we do, as well as greater brand awareness in the footwear market. Our
ability to succeed depends on our ability to remain competitive with respect to the quality, design, price and timely delivery of products. Competition could materially
adversely affect our business, financial condition, results of operations and cash flows.
Our financial success is influenced by the success of our wholesale customers, and the loss of such a key customer could have a material adverse effect on our financial
condition and results of operations.
Much of our financial success is directly related to the ability of our retailer and distributor partners to successfully market and sell our brands directly to consumers. If a
retailer or distributor partner fails to satisfy contractual obligations or to otherwise meet our expectations, it may be difficult to locate an acceptable substitute partner. If we
determine that it is necessary to make a change, we may experience increased costs, loss of customers, or increased credit or inventory risk. In addition, there is no
guarantee that any replacement retailer or distributor partner will generate results that are more favorable than the terminated party. We currently do not have long-term
contracts with any of our retailers. Sales to our retailers and distributors are generally on an order-by-order basis and are subject to rights of cancellation and rescheduling
by our wholesale customers. We use the timing of delivery dates for our wholesale customer orders as a key factor in forecasting our sales and earnings for future periods. If
any of our major customers experience a significant downturn in business or fail to remain committed to our products or brands, these customers could postpone, reduce, or
discontinue purchases from us, which could result in us failing to meet our forecasted results. These risks have been exacerbated recently as our key retail customers are
operating within a retail industry that continues to undergo significant structural changes fueled by technology and the internet, changes in consumer purchasing behavior
and a shrinking retail footprint. We may lose key retail and wholesale customers if they fail to manage the impact of the rapidly changing retail environment. Any loss of
one of these key customers, the financial collapse or bankruptcy of one of these customers, or a significant reduction in purchases from one of these customers could result
in a significant decline in sales, write-downs of excess inventory, or increased discounts to our customers, any of which could have a material adverse effect on our financial
condition or results of operations.
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Certain of our larger wholesale customers may develop and manufacture competing products under their own brands and reduce purchases of our branded products.
Certain of our larger wholesale customers may develop, and in certain cases have developed, products under their own brands that compete with our branded products.
Wholesale customers who increase the concentration of their own brands may result in a reduction or elimination of purchases of our branded products, which could have a
material adverse effect on our business, financial condition, results of operations and cash flows.
We currently manufacture a portion of our products, and we may not be able to do so in the future at costs that are competitive with those of competitors who source
their goods.
We currently plan to retain our internal manufacturing capability in order to continue benefiting from expertise we have gained with respect to footwear manufacturing
methods conducted at our manufacturing facilities. We continue to evaluate our manufacturing facilities and third-party manufacturing alternatives in order to determine the
appropriate size and scope of our manufacturing facilities. There can be no assurance that the costs of products that continue to be manufactured by us can remain
competitive with products sourced from third parties.
We rely on our distribution centers in Ohio and Nevada and manufacturing facilities in the Dominican Republic, Puerto Rico, and China and if there is a natural
disaster or other serious disruption at any of these facilities, we may be unable to deliver merchandise effectively to our retailers and consumers.
We rely on our distribution centers located in Ohio and Nevada and our manufacturing facilities in the Dominican Republic, Puerto Rico, and China. Any natural disaster or
other serious disruption at any of these facilities due to fire, tornado, hurricane, flood, other natural disaster, pandemic, public health crisis, labor dispute, terrorist attack or
any other cause could damage our ability to manufacture our products, a portion of our inventory, or impair our ability to use our distribution center as a docking location
for merchandise. Any of these occurrences could impair our ability to adequately supply our retailers and consumers and harm our operating results.
If our efforts to establish and protect our trademarks, patents and other intellectual property are unsuccessful, the value of our brands could suffer.
We regard certain of our footwear designs as proprietary and rely on patents to protect those designs. We believe that the ownership of patents is a significant factor in our
business. Existing intellectual property laws afford only limited protection of our proprietary rights, and it may be possible for unauthorized third parties to copy certain of
our footwear designs or to reverse engineer or otherwise obtain and use information that we regard as proprietary. If our patents are found to be invalid, however, to the
extent they have served, or would in the future serve, as a barrier to entry to our competitors, such invalidity could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
We own U.S. registrations for many our trademarks, trade names and designs, including such marks as Muck, Rocky, Georgia Boot, Durango, Lehigh, XTRATUF and
Ranger. Additional trademarks, trade names and designs are the subject of pending federal applications for registration. We also use and have common law rights in certain
trademarks. Over time, we have increased distribution of our goods in several foreign countries. Accordingly, we have applied for trademark registrations in a number of
these countries. We intend to enforce our trademarks and trade names against unauthorized use by third parties.
An impairment of intangibles, including goodwill, could have an adverse impact to the Company’s results of operations.
The carrying value of intangibles represents the fair value of trade names and other intangibles as of the acquisition date. Intangibles expected to contribute indefinitely to
the Company’s cash flows are not amortized but must be evaluated by the Company at least annually for impairment. If the carrying amounts of one or more of these assets
are not recoverable based upon discounted cash flow and market-approach analyses, the carrying amounts of such assets are impaired by the estimated difference between
the carrying value and estimated fair value. An impairment charge could adversely affect the Company’s results of operations.
Our success depends on our ability to forecast sales.
Our investments in infrastructure and product inventory are based on sales forecasts and are necessarily made in advance of actual sales. The markets in which we do
business are highly competitive, and our business is affected by a variety of factors, including brand awareness, changing consumer preferences, product innovations,
susceptibility to fashion trends, retail market conditions, weather conditions and economic conditions, and other factors. One of our principal challenges is to improve our
ability to predict these factors in order to enable us to better match production with demand. In addition, our growth over the years has created the need to increase the
investment in infrastructure and product inventory and to enhance our systems. To the extent sales forecasts are not achieved, costs associated with the infrastructure and
carrying costs of product inventory would represent a higher percentage of revenue, which would adversely affect our business, financial condition, results of operations and
cash flows.
Our dividend policy may change.
Although we have paid dividends to our shareholders, we have no obligation to continue doing so and may change our dividend policy at any time without notice to our
shareholders. Our ABL Facility and Term Facility (as such terms defined in Note 10 - Long-Term Debt of our Consolidated Financial Statements) also contain restrictions
on the amount of dividend payments. Holders of our common stock are only entitled to receive such cash dividends as our Board of Directors may declare out of funds
legally available for such payments.
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Industry Risks
Because the footwear market is sensitive to decreased consumer spending and slow economic cycles, if general economic conditions deteriorate, many of our customers
may significantly reduce their purchases from us or may not be able to pay for our products in a timely manner.
The footwear industry has been subject to cyclical variation and decline in performance when consumer spending decreases or softness appears in the retail market. Many
factors affect the level of consumer spending in the footwear industry, including:
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general business conditions;
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interest rates;
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the availability of consumer credit;
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weather;
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increases in prices of nondiscretionary goods;
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taxation; and
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consumer confidence in future economic conditions.
Consumer purchases of discretionary items, including our products, may decline during recessionary periods and also may decline at other times when disposable income is
lower. A downturn in regional economies where we sell products also reduces sales.
The continued shift in the third-party marketplace from traditional independent retailers to large mass merchandisers may result in decreased margins.
A continued shift in the third-party marketplace from traditional independent retailers to large mass merchandisers has increased the pressure on many footwear
manufacturers to sell products to these mass merchandisers at less favorable margins. Due to the competition from large discount mass merchandisers, a number of our
small retailing customers have gone out of business, and in the future more of these customers may go out of business, which could have a material adverse effect on our
business, financial condition, results of operations and cash flows.
The shift in consumer shopping to online retailers and our increased online sales pose various risks which may negatively impact our business.
The retail industry and consumer preferences are rapidly changing and we must ensure our own online e-Commerce websites and third-party marketplaces can
accommodate the consumer's growing desire to shop online. We must also provide digital assistance to our wholesale customers to support their e-Commerce websites.
Failure to timely identify and effectively respond to the online trends of the retail industry could negatively impact our product reach and market share.
Our e-Commerce and third-party marketplace platforms pose numerous risks that could have an impact on our results of operations including:
●
unanticipated operating problems such as computer viruses, electronic data theft and other disruptions;
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reliance on third-party software and service providers;
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continual investment in technology and cyber security;
●
our ability to adapt and change to the ever-changing consumer buying habits through customer-facing technology, including mobile technology solutions that
function, and provide a convenient and consistent experience for consumers;
●
exposure to potential liability for online content; and
●
increased competition among other e-Commerce vendors.
General Risk Factors
Changes to U.S. tax, tariff and import/export regulations may have a negative effect on global economic conditions, financial markets and our business.
The current political climate has introduced greater uncertainty with respect to trade policies, tariffs and government regulations affecting trade between the U.S. and other
countries. We source products from manufacturers located outside of the U.S., primarily in China, Vietnam, the Dominican Republic, India, and Mexico. Major
developments in tax policy or trade relations, such as the disallowance of tax deductions for imported products or the imposition of unilateral tariffs on imported products,
could have a material adverse effect on our business, results of operations and liquidity.
There are risks, including stock market volatility, inherent in owning our common stock.
The market price and volume of our common stock have been, and may continue to be, subject to significant fluctuations. These fluctuations may arise from general stock
market conditions, the impact of risk factors described in this Item 1A on our results of operations and financial position, or a change in opinion in the market regarding our
business prospects or other factors, many of which may be outside our immediate control. Changes in the amounts and frequency of share repurchases or dividends also
could adversely affect the value of our common stock.
Disruption of our information technology systems and e-Commerce platforms could adversely affect our business
Our information technology systems and-e-Commerce platforms are critical to our business operations. Any interruption, unauthorized access, impairment or loss of data
integrity or malfunction of these systems could severely impact our business, including delays in product fulfillment and reduced efficiency in operations. In addition, costs
and potential problems and interruptions associated with the implementation of new or upgraded systems, or with maintenance or adequate support of existing systems,
could disrupt or reduce the efficiency of our operations. Disruption to our information technology systems may be caused by natural disasters, accidents, power disruptions,
telecommunications failures, acts of terrorism or war, denial-of-service attacks, computer viruses, physical or electronic break-ins, or similar events or disruptions. System
redundancy may be ineffective or inadequate, and our disaster recovery planning may not be sufficient for all eventualities. Such failures or disruptions could prevent access
to our online services and preclude retail transactions resulting in loss of sales. System failures and disruptions could also impede the manufacturing and shipping of
products, transactions processing and financial reporting. Additionally, we may be adversely affected if we are unable to improve, upgrade, maintain, and expand our
technology systems.
Some of our employees are working remotely which could strain our information technology systems and impact business continuity plans. Remote work could also
introduce operational risk such as, but not limited to, cyber security risks.
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We are implementing a new enterprise resource planning system, and challenges with the implementation of the system may have an adverse effect on our business,
financial condition results of operations
We are in the process of completing a multi-year implementation of a complex new enterprise resource planning system (“ERP”). The ERP implementation has required the
integration of the new ERP with multiple information systems and business processes and has been designed to continue to accurately maintain our books and records and
provide timely information to our management team important to maximizing the operating efficiency of our business. Conversion from our old systems to the new ERP
may cause inefficiencies until the ERP is stabilized and mature. The implementation of our new ERP will mandate subtle changes to our procedures and controls over
financial reporting. If we are unable to adequately implement and maintain procedures and controls relating to our new ERP, our ability to produce timely and accurate
financial statements or comply with applicable regulations could be impaired and impact our assessment of the effectiveness of our internal controls over financial
reporting.
A cyber-security breach could have a material adverse effect on our business and reputation.
We rely heavily on digital technologies for the successful operation of our business, including electronic messaging, digital marketing efforts and the collection and
retention of customer data and employee information. We also rely on third parties to process credit card transactions, perform online e-Commerce and social media
activities and retain data relating to our financial position and results of operations, strategic initiatives and other important information. Despite the security measures we
have in place, our facilities and systems and those of our third-party service providers, may be vulnerable to cyber-security breaches, acts of vandalism, computer viruses,
misplaced or lost data, programming and/or human errors or other similar events. Any misappropriation, loss or other unauthorized disclosure of confidential or personally
identifiable information, whether by us or by our third-party service providers, could damage our reputation and our customers’ willingness to purchase our products, which
may adversely affect our business. In addition, we could incur liabilities and remediation costs, including regulatory fines, reimbursement or other compensatory costs,
additional compliance costs, and costs for providing credit monitoring or other benefits to customers or employees affected. We maintain cyber risk insurance, but this
insurance may not be sufficient to cover all of our losses from any future breaches of our systems.
Compliance with data privacy and marketing laws may subject us to increased additional costs, and our ability to effectively engage customers via personalized
marketing may be impacted, all of which may have a material adverse effect on our business operations.
As data privacy and marketing laws change, we may incur additional costs to ensure we remain in compliance. If applicable data privacy and marketing laws become more
restrictive at the federal or state level, our compliance costs may increase, our ability to effectively engage customers via personalized marketing may
decrease, opportunities for growth may be curtailed by our compliance capabilities or reputational harm and the potential liability for security breaches may increase. We are
also subject to U.S. and international data privacy and cybersecurity laws and regulations, which may impose fines and penalties for noncompliance and may have an
adverse effect on our operations. For example, the European Union’s General Data Protection Regulation (the "GDPR"), which became effective in May 2018, extends the
scope of the European Union’s data protection laws to all companies processing data of European Union residents, regardless of our location, and imposes significant new
requirements on how we collect, processes and transfer personal data.
In addition, California adopted the California Consumer Privacy Act ("CCPA"), which became effective January 1, 2020 and limits how we may collect and use personal
data. Various other states have followed with similar laws governing the collection and use of personal data. As a result, GDPR, CCPA and other state law compliance
increased our responsibility and potential liability in relation to personal data that we process, and we may be required to put in place additional mechanisms to ensure
compliance with the new data protection rules. Any failure to comply with these rules and related national laws of European Union member states, could lead to government
enforcement actions and significant penalties and fines against us, and could adversely affect our business, financial condition, cash flows and results of operations.
Continued compliance with the foregoing laws and regulations, as well as any new laws or regulations that may be enacted in the future, can be costly.
We are subject to certain environmental and other regulations.
Some of our operations use substances regulated under various federal, state, local and international environmental and pollution laws, including those relating to the
storage, use, discharge, disposal and labeling of, and human exposure to, hazardous and toxic materials. Compliance with current or future environmental laws and
regulations could restrict our ability to expand our facilities or require us to acquire additional expensive equipment, modify our manufacturing processes or incur other
significant expenses. In addition, we could incur costs, fines and civil or criminal sanctions, or incur liability for third-party property damage or personal injury claims, or
we could be required to incur substantial investigation or remediation costs if we were to violate or become liable under any environmental laws. Liability under
environmental laws can be joint and several and without regard to comparative fault. There can be no assurance that violations of environmental laws or regulations have
not occurred in the past and will not occur in the future as a result of our inability to obtain permits, human error, equipment failure or other causes, and any such violations
could harm our business, financial condition, results of operations and cash flows.
Many governmental and regulatory bodies globally are implementing regulations to address the impacts of climate change. Compliance with these laws and regulations,
whether mandated or voluntarily adopted by us, our suppliers, or third-party manufacturers, may lead to heightened costs across various aspects of our operations. These
increased costs may encompass energy, production, transportation, raw materials, capital expenditures, as well as insurance premiums and deductibles. Such financial
impacts have the potential to adversely affect our business, financial condition and results of operations. We maintain an ongoing assessment and monitoring processes to
gauge the impact that future climate change disclosures, regulations, or industry standards, and international treaties may have on our business and results of operations.
Our products are subject to increasingly stringent and complex domestic and foreign product labeling, performance, environmental and safety standards, laws and other
regulations, including those pertaining to perfluoroalkyl and polyfluoroalkyl substances (PFAS) and other environmental impacts. These requirements could result in greater
expense associated with compliance efforts, and failure to comply with these regulations could result in a delay, non-delivery, recall, or destruction of inventory shipments
during key seasons, a loss of advance orders from wholesale customers or in other financial penalties. Significant or continuing noncompliance with these standards and
laws could disrupt our business and harm our reputation. Our products are generally used in outdoor activities, sometimes in severe conditions. Product recalls or product
liability claims resulting from the failure, or alleged failure, of our products could have a material adverse effect on the reputation of our brands and result in additional
expenses.
We are subject to periodic litigation and other regulatory proceedings, which could result in the unexpected expenditure of time and resources.
We are a defendant from time to time in lawsuits and regulatory actions relating to our business and to our past operations. Due to the inherent uncertainties of litigation and
regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have a material adverse impact on our
business, financial condition and results of operations. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are expensive and
will require that we devote substantial resources and executive time to defend, thereby diverting management’s attention and resources that are needed to successfully run
our business.
Loss of services of our key personnel could adversely affect our business.
The development of our business has been, and will continue to be, dependent upon execution at all levels of our organization which requires an experienced and talented
executive team. The loss of service of any of the executive officers or key employees could have an adverse effect on our business and financial condition. We have entered
into employment agreements with several executive officers and key employees, and also offer compensation packages designed to attract and retain talent.
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ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY.
Risk Management & Strategy
Rocky Brands recognizes the critical importance of developing, implementing, and maintaining a robust information security program to safeguard our information systems
and protect the confidentiality, integrity, and availability of our data. We have established information security programs and policies, including processes for identifying,
assessing, and managing risks arising from cybersecurity threats. These processes involve regular assessments of our information systems and infrastructure to identify
vulnerabilities and threats. We focus on executing a centralized information technology and cybersecurity program. Our Company-wide approach is to be positioned as one
security program, one posture and one roadmap for the enterprise. This platform is administered across our departments by our cybersecurity team led by our Vice President
of Information Technology. Our information security programs and policies are aligned with those of the Center for Internet Security (CIS), Control Objectives for
Information Technologies (COBIT), and National Institute of Standards Technology (NIST).
We are integrating our information security programs and cybersecurity risk management processes into our overall enterprise risk management (“ERM”) strategy. We are
developing an entity-wide information technology ERM framework and will take steps to monitor, report on and communicate to stakeholders consistent with our ERM
strategy. Recognizing the cybersecurity risk landscape is complex and ever evolving, we engage with a broad group of external experts and consultants, and auditors in
evaluating and testing our information security programs. We leverage this specialized expertise to manage threat detection and response management, conduct regular
audits and consult on our overall information security programs.
We are acutely aware of risks associated with third-party service providers and we incorporate cybersecurity into our third-party vendor management policy. We conduct
thorough security assessment to determine the category of risk third parties pose to Rocky Brands, with a priority focus on vendors with products or services that will have
access to private and sensitive information. Vendor assessments incorporate inputs, including for example, BitSight and Service Organization Control Type 2 (“SOC2”)
information available for our third-party vendors. Our assessments and monitoring are designed to mitigate risks related to data breaches or other security incidents
originating from third parties.
Although no cybersecurity incidents during the year ended December 31, 2024 which had a material impact on our business strategy, results of operations or financial
condition, the scope and impact of any future incident cannot be predicted. See Item 1A. - Risk Factors for more information about our information security and
cybersecurity risks.
Governance
Our Board of Directors has established governance protocol over risk management, including general oversight of information technology security and cybersecurity risk.
The Audit Committee is central to the Board’s oversight of cybersecurity risks and is primarily responsible for this domain. The Audit Committee actively participates in
discussions with management, external experts and amongst themselves regarding cybersecurity risks. The Audit Committee is comprised of Board members with broad
expertise, including technology, risk management and finance, enabling them to effectively oversee and govern cybersecurity risks. One Audit Committee member is
certified under the National Association of Corporate Directors Certificate in Cyber-Risk Oversight Program.
We have developed a robust organizational structure to manage and oversee our information technology and cybersecurity programs, including full-time information
security associates dedicated to cybersecurity. These individuals possess relevant experience and expertise in cybersecurity and risk management. Our Director, IT
Infrastructure & Security leads our information security, data privacy and protection, and information technology compliance programs. The Director stays current with
security related topics by either webinars, training classes or cybersecurity conferences. Guided by management, our information technology teams maintain a detailed
Cyber Incident Response Plan ("CIRP") and hold frequent meetings to ensure the proper communication and execution of our security controls and procedures. The
Cybersecurity team has various expertise ranging in Associate of ISC2-CISSP certification and extensive training on current security products. The Director, IT
Infrastructure & Security regularly reports to the Vice President of Information Technology and maintains ongoing dialog with the reporting structure to our CEO, CFO and
COO, and Board of Directors regarding our information security programs. This reporting includes updates on matters evaluated under our CIRP, the current threat
landscape, cybersecurity initiatives, and the effectiveness of our cybersecurity programs.
Our Vice President of Information Technology has more than 35 years working as an IT professional, 13 years of which has been at the Company in various roles such as,
Programming, Business Analysis, Systems Analysis, Operations, EDI Manager, and Applications Director.
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ITEM 2. PROPERTIES.
We own or lease various properties in domestic and foreign locations. Our principal properties include our corporate offices, manufacturing facilities, distribution
centers and our retail outlet store. Our administrative, sales, and marketing operations are generally performed from our owned facilities in Nelsonville, Ohio. We operate
our manufacturing operations through our owned facility in Chuzhou, China as well as several leased facilities in Puerto Rico and the Dominican Republic. We operate our
distribution operations through an owned facility in Logan, Ohio and a leased facility in Reno, Nevada. Our retail outlet store operates from an owned facility in
Nelsonville, Ohio. Our owned properties have no major encumbrances. We believe our facilities are adequate for our current and near-term needs, and we will be able to
locate additional facilities, as needed.
The following locations represent our major properties by segment:
Wholesale: Nelsonville, Ohio; Logan, Ohio; Chuzhou, China; Reno, Nevada; Puerto Rico; Dominican Republic
Retail: Nelsonville, Ohio; Logan, Ohio; Chuzhou, China; Reno, Nevada
Contract Manufacturing: Nelsonville, Ohio; Logan, Ohio; Reno, Nevada; Puerto Rico; Dominican Republic
ITEM 3. LEGAL PROCEEDINGS.
We are, from time to time, a party to litigation which arises in the normal course of our business. Although the ultimate resolution of pending proceedings cannot be
determined, in the opinion of management, the resolution of these proceedings in the aggregate will not have a material adverse effect on our financial position, results of
operations, or liquidity. A discussion of legal matters is found in Note 20 - Commitments and Contingencies of our Consolidated Financial Statements included in Part II -
Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
Market Information
Our common stock trades on the NASDAQ Global Select Market under the symbol "RCKY."
As of February 28, 2025, there were 65 shareholders of record of our common stock.
Dividends
In 2013, our Board of Directors approved a dividend policy pursuant to which the Company intends to continue paying comparable cash dividends on its common stock.
Share Repurchases
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.
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Performance Graph
The following performance graph compares our cumulative shareholder return on our common shares with the NASDAQ Composite Index and the Standard & Poor's
Footwear Index, which is a published industry index. The comparison of the cumulative total return to shareholders for each of the periods assumes that $100 was invested
in our common stock on December 31, 2019 and in the NASDAQ Stock Market (U.S.) Index and the Standard & Poor's Footwear Index and that all dividends were
reinvested. This comparison includes the period ended December 31, 2019 through the period ended December 31, 2024.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") describes the matters that we consider to be important to
understanding the results of our operations for each of the two years in the period ended December 31, 2024 and 2023, and our capital resources and liquidity as of
December 31, 2024 and 2023. For the discussion of the changes in our results of operations and statement of cash flows between the years ended December 31, 2023 and
December 31, 2022, refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", of our Annual Report on Form 10-K for the
year ended December 31, 2023, filed with the SEC on March 15, 2024, which is available on the SEC's website at https://www.sec.gov/edgar/search/ and our corporate
website at www.rockybrands.com. We analyze the results of our operations for the last two years (including trends in the overall business), followed by a discussion of our
cash flows and liquidity, our credit facilities, and our contractual commitments. We then provide a review of the critical accounting policies and estimates we have made
that we believe are most important to the understanding of our MD&A and our Consolidated Financial Statements. We conclude our MD&A with information on recent
accounting pronouncements we adopted during the year, as well as those not yet adopted that are expected to have an impact on our financial accounting practices.
The following discussion should be read in conjunction with our Consolidated Financial Statements and the notes thereto, included elsewhere herein. The forward-looking
statements in this section and other parts of this Annual Report on Form 10-K involve risks and uncertainties including statements regarding our plans, objectives, goals,
strategies and financial performance. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of factors set forth
under the caption "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995" below. The Private Securities Litigation Reform Act of 1995 provides
a "safe harbor" for forward-looking statements made by or on behalf of the Company.
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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.
Our brands have a long history of representing high quality, comfortable, functional, and durable footwear, and our products are organized around six target markets: work,
outdoor, western, commercial military, duty and military. Our footwear products incorporate varying features and are positioned across a range of suggested retail price
points from $48.00 for our value priced products to $655.00 for our premium products. As a part of our strategy of outfitting consumers from head-to-toe, we market
complementary branded apparel and accessories that we believe leverage the strength and positioning of each of our brands.
Our products are distributed through three distinct business segments: Wholesale, Retail and Contract Manufacturing. In our Wholesale business, we distribute our products
through a wide range of distribution channels representing over 10,000 retail store locations in the U.S., the U.K. and other international markets such as Europe. Our
Wholesale channels vary by product line and include sporting goods stores, outdoor retailers, independent shoe retailers, hardware stores, catalogs, mass merchants, uniform
stores, farm store chains, specialty safety stores, specialty retailers, and online retailers. Our Retail business includes direct sales of our products to consumers through our
business-to-business web platform, e-Commerce websites, third-party marketplaces and our Rocky Outdoor Gear Store. Our Contract Manufacturing segment includes sales
to the U.S. Military, private label sales and any sales to customers in which we are contracted to manufacture or source a specific footwear product for a customer.
During the second quarter of 2024, we amended and restated our Original ABL Facility (as such term is defined in Note 10 - Long-Term Debt of our Consolidated Financial
Statements) which resulted in a restated $175.0 million revolving credit facility and a new $50.0 million term facility. The proceeds from this transaction were used to retire
our existing senior secured term loan facility with TCW Asset Management Company, LLC as of April 26, 2024. This transaction resulted in an expense of $2.6 million,
consisting of a loss on extinguishment of term debt in the amount of $1.1 million and a $1.5 million prepayment penalty, which are included in Interest Expense and Other -
net within the Consolidated Statements of Operations for the twelve months ended December 31, 2024. See Note 10 - Long-Term Debt of our Consolidated Financial
Statements for further information regarding our long-term debt.
In 2023, we were awarded a new multi-year contract with the U.S. Military pursuant to which we will produce and ship a minimum number of pairs to the U.S. Military
through 2026, with an option to extend. The first quarter of 2024 was the first full quarter in which shipments were made to the U.S. Military under this multi-year contract.
The sales under this contract are included in our Contract Manufacturing segment.
During the first quarter of 2023, we divested the Servus brand. The gain of approximately $1.3 million on the sale of the Servus brand was recorded within Interest Expense
and Other - net in the Consolidated Statements of Operations for the year ended December 31, 2023. The Servus brand was sold to allow us to focus on our more profitable
core brands and allocate resources toward growth and development of opportunities with those brands moving forward.
During the third quarter of 2023, we closed our manufacturing facility in Rock Island, Illinois. This facility primarily manufactured product for the Servus brand. Following
the sale of the Servus brand in the first quarter of 2023, the Rock Island facility operations were underutilized, prompting our decision to close the facility during the third
quarter of 2023.
ECONOMIC CONDITIONS AND UNCERTAINTIES
Our growth strategy is founded substantially on the expansion of our brands into new footwear and apparel markets. New products that we introduce may not be successful
with consumers or one or more of our brands may fall out of favor with consumers. If we are unable to anticipate, identify or react appropriately to changes in consumer
preferences, we may not grow as fast as we plan to grow, or our sales may decline, and our brand image and operating performance may suffer.
Furthermore, achieving market acceptance for new products will likely require us to exert substantial product development and marketing efforts, which could result in a
material increase in expenses to which there can be no assurance that we will have the resources necessary to undertake such efforts. Material increases in expenses could
adversely impact our results of operations and cash flows.
We may also encounter difficulties in producing new products that we did not anticipate during the development stage. Our development schedules for new products are
difficult to predict and are subject to change as a result of shifting priorities in response to consumer preferences and competing products. If we are not able to efficiently
manufacture newly developed products in quantities sufficient to support retail distribution, we may not be able to recoup our investment in the development of new
products. Failure to gain market acceptance for new products that we introduce could impede our growth, reduce our profits, adversely affect the image of our brands, erode
our competitive position, and result in long term harm to our business.
As the macroeconomic environment is continuously evolving, we are aware that global trends, such as inflationary pressures, are weakening consumer sentiment, negatively
impacting consumer spending, and creating differing traffic patterns across channels. These conditions have led to elevated inventory levels in certain markets and an
increased promotional environment. We have also experienced higher interest rates which have resulted in increased borrowing costs. There is ongoing uncertainty
surrounding the global economy and macroeconomic environment, which we expect to continue and could potentially cause disruption and near-term challenges for our
business.
We continue to monitor pressures on the global supply chain, which have shifted the timing of shipments across our brands, resulting in increased inventory levels outpacing
our sales growth. However, we have seen improvements in transit lead times and related freight costs compared to the prior period, which have had a positive impact on the
results of our operations through 2024.
2024 FINANCIAL OVERVIEW
●
Net sales decreased 1.7% to $453.8 million in 2024 compared to 2023;
●
Gross margin increased 70 basis points to 39.4% of net sales in 2024 versus 38.7% of net sales in 2023;
●
Income from operations in 2024 compared to 2023 decreased 12.1% to $31.1 million;
●
Interest expense decreased 19.8% to $17.0 million in 2024 over 2023;
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●
Net income increased 9.6% to $11.4 million, or $1.52 per diluted share in 2024 compared to $10.4 million, or $1.41 per diluted share in 2023;
●
Total debt, net of debt issuance costs, decreased 25.7% to $128.7 million at December 31, 2024 compared to $173.1 million at December 31, 2023; and
●
Inventory decreased 1.5% to $166.7 million at December 31, 2024 compared to $169.2 million at December 31, 2023.
During the twelve months ended December 31, 2024, we reported a decline in net sales compared to the year ended December 31, 2023, which was attributable to a decline
in sales in our Wholesale reporting segment, partially offset by increases in sales in our Retail and Contract Manufacturing reporting segments. The decline in sales in our
Wholesale reporting segment was due to certain non-recurring sales in 2023, and Servus brand sales, which was divested in March 2023. The increase in Retail sales was
attributed to increased sales in our Lehigh CustomFit Platform as well as year-over-year growth in our e-Commerce business.
The increase in gross margin to 39.4 % of net sales in 2024 from 38.7% of net sales in 2023 was attributed to an increase in Wholesale gross margin of 190-basis points as
well as an increase in Retail net sales as percentage of total net sales. Our Retail reporting segment carries higher gross margins than both our Wholesale and Contract
Manufacturing Reporting segments. The increase was offset by a decrease in Retail gross margins as a percentage of net sales in 2024 compared to the prior year.
Operating income decreased 12.1% to $31.1 million for the year ended December 31, 2024 compared to $35.4 million for the year ended December 31, 2023. The decrease
in operating income was due to higher freight and logistics costs associated with higher Retail sales as well as higher marketing and other discretionary spending due to the
pullback of spending in 2023.
Interest expense decreased 19.8% in 2024 compared to 2023 due to lower debt levels and lower interest rates resulting from the debt refinance that closed in April 2024.
Net income increased 9.6% to $11.4 million in 2024 from $10.4 million due to lower interest expense and lower tax expense in 2024 compared to that of 2023.
As of December 31, 2024, cash and cash equivalents were approximately $3.7 million and our total indebtedness, net of debt issuance costs, was approximately $128.7
million, a reduction of $44.4 million, or 25.7%, over our indebtedness at December 31, 2023. Of total debt paydown, $21.7 million occurred in the fourth quarter of 2024.
Our strong sales in the second half of the year, coupled with additional cash on-hand resulting from lower interest rates and corresponding interest payments subsequent to
the debt refinance in April 2024, provided excess cash flow that we were able to put towards debt repayments in the latter part of 2024.
Total inventory decreased 1.5%, or $2.5 million, to $166.7 million at December 31, 2024 compared to $169.2 million at December 31, 2023. Our inventory on-hand
decreased at December 31, 2024 by approximately $14.9 million versus the prior year, partially offset by an increase in in-transit inventory of approximately $12.6 million.
In 2024 and 2023, our business generated a positive cash flow from operating activities of $52.8 million and $73.6 million, respectively. Generally, the cash provided from
operations consists of changes in our working capital and is sufficient to fund operations in any given year. Our positive cash flow in 2024 was offset by cash used in
investing and financing activities of $3.0 million and $50.6 million, respectively, resulting in an overall decrease in cash of approximately $0.8 million in 2024. For the year
ending December 31, 2023, our positive cash flow from operations was enhanced by a positive cash flow from investing activities of $13.4 million, offset by cash used in
financing activities of $88.2 million, resulting in an overall decrease in cash of approximately $1.2 million in 2023.
Excluding certain non-recurring sales in 2023, 2024 was a year of growth for Rocky from a net sales perspective. This growth was primarily fueled by an increase in Retail
sales, a combination of increases in sales in both our Lehigh CustomFit Platform and e-Commerce websites. We invested more in marketing and other discretionary
spending in 2024, creating a decrease in income from operations in 2024 compared to 2023. Due to refinancing our long-term debt during 2024, which resulted in lower
interest rates as well as lower debt levels, we achieved an increase in income before taxes in 2024 compared to that of 2023.
Analysis of Results of Operations
The following table sets forth Consolidated Statements of Operations data as percentages of total net sales:
Twelve Months Ended
December 31,
($ in thousands)
2024
2023
NET SALES:
$
453,772 $
461,833
Cost of goods sold
274,762
283,235
Gross margin
179,010
178,598
Operating expenses
147,944
143,226
Income from operations
$
31,066 $
35,372
Net sales decreased $8.1 million or 1.7% for the twelve months ended December 31, 2024, due to a decrease in Wholesale net sales, partially offset by an increase in Retail
and Contract Manufacturing net sales.
Gross margin in 2024 was 39.4% compared to 38.7% in 2023. The increase in gross margin was attributed to an increase in both Wholesale and Contract Manufacturing
gross margin as well as a higher mix of Retail segment net sales, which carry higher margins than our Wholesale and Contract Manufacturing segments.
Operating expenses increased $4.7 million to 32.6% of net sales in 2024 compared to 31.0% of net sales in 2023. The increase in operating expenses was due to a $4.0
million impairment charge for the Muck trademark and an increase in outbound freight and other logistic costs associated with the increase in Retail sales. See Note 7 -
Goodwill and Other Intangible Assets of our Consolidated Financial Statements for additional information on the Muck trademark impairment.
Twelve Months Ended
December 31,
($ in thousands)
2024
2023
Inc./ (Dec.)
Inc./ (Dec.)
NET SALES:
Wholesale
$
313,340 $
337,019 $
(23,679)
(7.0)%
Retail
126,868
116,960
9,908
8.5
Contract Manufacturing
13,564
7,854
5,710
72.7
Total Net Sales
$
453,772 $
461,833 $
(8,061)
(1.7)%
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The decrease in Wholesale net sales for the twelve months ended December 31, 2024 was due to non-recurring sales that occurred during 2023 and are not expected to
continue on an on-going basis. These sales included temporarily elevated commercial military footwear sales to a single customer throughout 2023, Servus brand sales prior
to its divestiture in March 2023, sales relating to the change to a distributor model in Canada in November 2023, and sales relating to the manufacturing of Servus product
following the divestiture of the Servus brand.
Retail net sales for the twelve months ended December 31, 2024 increased due to growth in our Lehigh CustomFit Platform and our direct to consumer e-Commerce
business. The increase in net sales in our Lehigh CustomFit Platform was attributed to the completion of the realignment of our sales organization in the first quarter of 2024
which allowed us to expand our customer base and increase offerings to current customers. The increase in sales under our direct to consumer e-Commerce business
was due to increased targeted marketing efforts, primarily through digital marketing. This led to increased brand awareness and allowed us to engage more directly with
consumers, which resulted in increased traffic on our branded websites and increased sales compared to the prior year ago period.
The increase in Contract Manufacturing net sales for the twelve months ended December 31, 2024 was due to a multi-year contract awarded with the U.S. Military.
Product Line Information - The following is supplemental information on net sales by product line for the years ended December 31:
2024
($ in thousands)
Wholesale
Retail
Contract
Manufacturing
Total
% of Sales
Work footwear
$
106,187 $
81,873 $
2,289 $
190,349
41.9%
Outdoor footwear
100,872
29,350
-
130,222
28.7%
Western
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%
Other
765
3,975
-
4,740
1.0%
Total
$
313,340 $
126,868 $
13,564 $
453,772
100.0%
2023
($ in thousands)
Wholesale
Retail
Contract
Manufacturing
Total
% of Sales
Work footwear
$
122,872 $
75,369 $
(145) $
198,096
42.9%
Outdoor footwear
102,710
27,714
-
130,424
28.2%
Western
63,108
7,266
-
70,374
15.2%
Duty and commercial military footwear
47,222
3,260
-
50,482
10.9%
Military footwear
-
-
7,999
7,999
1.7%
Other
1,107
3,351
-
4,458
1.0%
Total
$
337,019 $
116,960 $
7,854 $
461,833
100.0%
The following information is presented on gross margin for the years ending December 31, 2024 and 2023:
Twelve Months Ended
December 31,
($ in thousands)
2024
2023
Inc./ (Dec.)
GROSS MARGIN:
Wholesale Margin $'s
$
117,245 $
119,485 $
(2,240)
Margin %
37.4%
35.5%
1.9%
Retail Margin $'s
$
60,153 $
58,391 $
1,762
Margin %
47.4%
49.9%
(2.5)%
Contract Manufacturing Margin $'s
$
1,612 $
722 $
890
Margin %
11.9%
9.2%
2.7%
Total Margin $'s
$
179,010 $
178,598 $
412
Margin %
39.4%
38.7%
0.7%
The increase in Wholesale gross margin as a percentage of net sales for the twelve months ended December 31, 2024 compared to the twelve months ended December 31,
2023 was due to product mix as well as more favorable sourcing costs in 2024 compared to the prior year. Additionally, we divested the Servus brand in March 2023, which
carried lower gross margins than the rest of our product portfolio.
Retail gross margins as a percentage of net sales decreased for the twelve months ended December 31, 2024 compared to the same year ago period due to increased
promotional efforts across all of our retail channels in order to optimize our inventory levels.
Contract Manufacturing gross margin as a percentage of net sales increased for the twelve months ended 2024 compared to 2023
due to increased sales with the U.S. Military which carried higher margins than private label sales.
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Twelve Months Ended
December 31,
($ in thousands)
2024
2023
Inc./ (Dec.)
Inc./ (Dec.)
OPERATING EXPENSES:
General and administrative
$
109,354 $
110,677 $
(1,323)
(1.2)%
Sales and marketing
27,997
25,464
2,533
9.9
Trademark impairment
4,000
-
4,000
100.0
Depreciation and amortization
6,593
7,085
(492)
(6.9)%
Total Operating Expenses
$
147,944 $
143,226 $
4,718
3.3%
% of Net Sales
32.6%
31.0%
1.6%
The increase in operating expenses as a percentage of net sales for the twelve months ending December 31, 2024 was attributable to increased outbound freight and logistics
costs associated with an increase in Retail sales as well as an increase in marketing, incentive compensation and other discretionary spending in 2024 compared to 2023.
Additionally, we recognized a $4.0 million non-cash impairment charge for the Muck trademark following our annual indefinite-lived intangibles impairment test performed
in the fourth quarter of 2024. See Note 7 - Goodwill and Other Intangible Assets of our Consolidated Financial Statements for additional information on the Muck
trademark impairment.
Twelve Months Ended
December 31,
($ in thousands)
2024
2023
Inc./ (Dec.)
Inc./ (Dec.)
INTEREST EXPENSE AND OTHER:
Interest expense
$
16,119 $
22,904 $
(6,785)
(29.6)%
Loss on term loan extinguishment
1,111
-
1,111
(100.0)
Other income, net
(222)
(345)
123
(35.7)
Gain on sale of business
-
(1,341)
1,341
(100.0)%
Total Interest Expense and Other
$
17,008 $
21,218 $
4,210
(19.8)%
The decrease in interest expense was mainly attributed to lower interest rates achieved through our debt refinance completed in April 2024, as well as lower debt levels for
the year ended December 31, 2024 compared to the year ago period. The debt refinance resulted in $1.1 million loss on term loan extinguishment charge and a $1.5 million
prepayment penalty which are included within Interest Expense and Other - net within the Consolidated Statements of Operations for the twelve months ended December
31, 2024. See Note 10 - Long-Term Debt of our Consolidated Financial Statement for more information.
We completed the sale of Servus brand and related assets in March 2023 which resulted in a gain on sale of approximately $1.3 million for the year ended December 31,
2023.
Twelve Months Ended
December 31,
($ in thousands)
2024
2023
Inc./ (Dec.)
Inc./ (Dec.)
INCOME TAXES:
Income Tax Expense
$
2,671 $
3,728 $
(1,057)
(28.4)%
Effective Tax Rate
19.0%
26.3%
(7.3)%
The effective tax rate for the twelve months ended December 31, 2024 was 19.0% compared to 26.3% for the twelve months ended December 31, 2023. The decrease in our
effective tax rate was due to a return to provision adjustment resulting from foreign tax credits recognized in the fourth quarter of 2023.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal sources of liquidity is 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 December 31, 2024, we maintained cash and cash equivalents of
$3.7 million and had $55.9 million of availability under our ABL Facility. Our primary ongoing operating cash flow requirements are for inventory purchases and other
working capital needs, capital expenditures, and payments on our credit facilities.
Our working capital consists primarily of trade receivables and inventory, offset by short-term debt and accounts payable. Our working capital fluctuates throughout the
year as a result of our seasonal business cycle and is generally lowest in the months of January through March of each year and highest during the months of May through
October of each year. Our cash generated from operations throughout the year is typically sufficient to fund our seasonal working capital requirements; 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 $95.9 million as of December 31, 2024, we also have a Term Facility with outstanding borrowings of $35.1
million as of December 31, 2024. Our ABL Facility and Term Facility require us to maintain a minimum fixed charge coverage ratio, as defined in the agreement.
Additionally, the ABL Facility and Term Facility contain restrictions on the amount of dividend payments. As of December 31, 2024, we were in compliance with the
covenant and restrictions. We may utilize portions of our excess cash to prepay certain amounts of long-term debt prior to maturity. During the year ended December 31,
2024, we paid down a total of $44.2 million in debt.
Our capital expenditures relate primarily to investments in information technology, molds and equipment associated with our manufacturing and distribution operations,
merchandising fixtures and projects related to our corporate offices.
We lease certain machinery, equipment, and manufacturing facilities under operating leases that generally provide for renewal options. Future minimum lease payments
under non-cancelable operating leases are outlined in further detail in Note 11 - Leases of our Consolidated Financial Statements.
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As of December 31, 2024, our material cash requirements from known contractual obligations and commitments relate primarily to our long-term debt and operating leases
commitments. See Note 10 - Long-Term Debt and Note 11 - Leases to the Consolidated Financial Statement for more information. Based on our current expectations and
forecasts of future earnings, we believe our cash generated from operations will provide sufficient liquidity to fund our operations and debt and lease obligations for the next
twelve months and beyond.
The following table presents the key categories of our Consolidated Statement of Cash Flows:
Twelve Months Ended
December 31,
($ in millions)
2024
2023
Operating activities
$
52.8 $
73.6
Investing activities
(3.0)
13.4
Financing activities
(50.6)
(88.2)
Net change in cash and cash equivalents
$
(0.8) $
(1.2)
Operating Activities. Net cash provided by operating activities for the year ended December 31, 2024 was $52.8 million compared to $73.6 million for the year ended
December 31, 2023. Adjusting for non-cash items, net income provided a cash in-flow of $35.5 million and $22.3 million for the years ended December 31, 2024 and 2023,
respectively. The net change in working capital and other assets and liabilities resulted in an increase to cash provided by operating activities of $17.2 million for the year
ended December 31, 2024, compared to an increase of $51.3 million for the year ended December 31, 2023.
During the year ended December 31, 2024, the net change in working capital was primarily impacted by an increase in accounts payable and accrued expenses of $7.7
million and $5.2 million, respectively. The increase in accounts payable and accrued expenses during the year ended December 31, 2024 compared to the prior year was due
to increased inventory purchases in the fourth quarter of 2024, compared to the fourth quarter of 2023. The increase in inventory purchases also led to increased inventory
in-transit at December 31, 2024 versus the year ago period and associated accrued duties and in-bound freight, which are included in accrued expenses and other liabilities
on the Consolidated Balances Sheets at December 31, 2024 and 2023. During the year ended December 31, 2023 inventory decreased $60.0 million, which was attributed to
a concentrated effort to optimize inventory levels during 2023.
Investing Activities. Net cash used in investing activities for the twelve months ended December 31, 2024 was primarily a result of purchases of fixed assets, specifically
machinery and equipment. Cash provided by investing activities for the twelve months ended December 31, 2023 was primarily derived from the proceeds from sale of
the Servus brand. See Note 3 - Sale of Servus Brand and Related Assets of our Consolidated Financial Statements.
Financing Activities. Cash used in financing activities for the twelve months ended December 31, 2024 and 2023 was primarily related to payments on our revolving credit
facility and term loan.
On February 24, 2025, we announced our new $7,500,000 share repurchase program. For additional information regarding this share repurchase program, see Note 14 -
Shareholder's Equity of our Consolidated Financial Statements.
We are contingently liable with respect to lawsuits, taxes and various other matters that routinely arise in the normal course of business. See Note 20 - Commitments and
Contingencies of our Consolidated Financial Statements for further discussion of legal matters. We do not have off-balance sheet arrangements, financings, or other
relationships with unconsolidated entities, also known as "Variable Interest Entities." Additionally, we do not have any related party transactions that materially affect the
results of operations, cash flow or financial condition.
23
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the Company's Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the U.S.
("U.S. GAAP"), requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an
ongoing basis, management evaluates these estimates. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other
sources. Historically, actual results have not been materially different from the Company's estimates. However, actual results may differ materially from these estimates
under different assumptions or conditions. The Company has identified the following critical accounting policies used in determining estimates and assumptions in the
amounts reported. Management believes that an understanding of these policies is important to an overall understanding of the Company's Consolidated Financial
Statements. Significant accounting policies are summarized in Note 1 - Basis of Presentation and Summary of Significant Accounting Policies of our Consolidated Financial
Statements.
Revenue recognition
Revenue is recognized when the performance obligations under the terms of a contract with our customer are satisfied. The performance obligation is satisfied, and revenue
is recorded when control passes to the customer which is generally upon shipment to the customer or at the time of sale for our retail store customers. Revenue is measured
as the amount of consideration we expect to receive in exchange for the transfer of our products, which is the net sales price.
The net sales price includes estimates of variable consideration for which reserves may be established. Components of variable consideration include discounts and
allowances, customer rebates, markdowns, and product returns. These reserves are based on the amounts earned, or to be claimed, on the related sales of our products.
Elements of variable consideration including discounts and allowances and rebates are determined at contract inception and are reassessed at each reporting date, at a
minimum, to reflect any change in the types of variable consideration offered to the customer. We determine estimates of variable consideration based on evaluations of
each type of variable consideration and customer contract, historical and anticipated trends, and current economic conditions. Overall, these reserves reflect our best
estimates of the amount of consideration to be earned on the related sales. Actual amounts of consideration ultimately received may differ from our estimates. If actual
results in the future vary from our estimates, we will adjust these estimates, which would affect net revenue and earnings in the period such variances become known.
Our estimated sales returns are based on historical customer return data and known or anticipated returns not yet received from customers. Actual returns in any future
period are inherently uncertain and thus may differ from estimates recorded. If actual or expected future returns are significantly higher or lower than the established
reserves, a reduction or increase to net revenues is recorded in the period in which the determination is made. See Note 17 - Revenue of our Consolidated Financial
Statements for additional information.
Inventories
Inventories are stated at the lower of cost or net realizable value, on a first-in, first-out basis. We reduce the carrying value of inventories to the lower of cost or net
realizable value for excess and obsolete inventories based upon assumptions about future demand and market conditions. If we estimate the net realizable value of our
inventory is less than the cost of the inventory, we record an adjustment equal to the difference between the cost of the inventory and the estimated net realizable value. The
adjustment is recorded as a charge to cost of goods sold. If changes in demand or market conditions result in reductions to the estimated net realizable value of our inventory
below our previous estimate, we would further adjust the value of our inventory in the period in which we made such a determination.
Goodwill and Indefinite-Lived Intangibles
Goodwill and intangible assets deemed to have indefinite lives are not amortized but are evaluated for impairment annually or whenever we identify certain triggering
events or circumstances that would more likely than not reduce the fair value of the assets below their carrying amount. Events or circumstances that might indicate an
interim evaluation is warranted include, among other things, unexpected adverse business conditions, macro and reporting unit specific economic factors, supply costs, and
unanticipated competitive activities.
We test goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter each fiscal year by quantitatively comparing the fair values of the
Wholesale and Retail reporting units and indefinite-lived intangibles to their carrying amounts. There was no goodwill allocated to our Contract Manufacturing reporting
unit.
For goodwill, we estimated 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. When
performing the income approach, we utilize the present value of cash flows to estimate fair value. The future cash flows for our reporting units were projected based on our
estimates, at that time, of future revenues, operating income, and other factors (such as working capital and capital expenditures). The discount rates used were based on a
weighted-average cost of capital determined from relevant market comparisons and take into consideration the risk and nature of the respective reporting unit's cash flows.
For the market approach, we use the guideline public company method which relies upon valuation multiples derived from stock prices and enterprise values of publicly
traded companies that are comparable to the reporting unit being evaluated.
The fair value of our trademarks was determined based on the income approach using the relief from royalty method. This method requires us to estimate the future
revenues for the related brands, the appropriate royalty rate, and the weighted average cost of capital.
We did not recognize any impairment charges for goodwill during fiscal year 2024 or 2023. During the fourth quarter of 2024, we recognized a $4.0 million impairment
charge for the Muck trademark. The charge is included within Operating Expenses within the Consolidated Statements of Operations for the twelve months ended
December 31, 2024. No impairment charges were recognized for the Company’s indefinite-lived intangible assets during fiscal year 2023. Refer to Note 7 - Goodwill and
Other Intangible Assets of our Consolidated Financial Statements for additional information on the Muck trademark impairment.
Income taxes
We are subject to taxation in the United States, as well as various state and foreign jurisdictions. The determination of our provision for income taxes requires significant
judgment, the use of estimates and the interpretation and application of complex tax laws. Our interpretation of tax laws, regulations and policies could differ from how
standard setting-bodies interpret them. State, local or foreign jurisdictions may enact tax laws that could result in further changes to taxation and materially affect our
financial position and results of operations.
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On an interim basis, we estimate the annual effective tax rate and record a quarterly income tax provision in accordance with the projected annual rate. As the year
progresses, the estimate is refined based upon actual events and earnings by jurisdiction during the year. This continual estimation process periodically results in a change to
our expected effective tax rate for the year. When this occurs, we adjust the income tax provision during the quarter in which the change in estimate occurs.
RECENT FINANCIAL ACCOUNTING PRONOUNCEMENTS
Refer to Note 2 - Accounting Standards Updates of our Consolidated Financial Statements for new accounting pronouncements adopted during the current year and the
expected impact of accounting pronouncements recently issued but not yet required to be adopted. To the extent the adoption of new accounting standards materially affects
financial condition, results of operations, or liquidity, the impacts are discussed in the applicable section of this MD&A and the Notes to Consolidated Financial Statements.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report, including Management’s Discussion and Analysis of Financial Conditions and Results of Operations, contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, which are intended to be covered by the
safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding our and management’s intent, belief, expectations, such as
statements concerning our future profitability and our operating and growth strategy. 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 all forward-looking statements involve risk and uncertainties including, without limitations, dependence on sales forecasts, changes in consumer demand,
seasonality, impact of weather, competition, reliance on suppliers, risks inherent to international trade, changing retail trends, the loss or disruption of our manufacturing and
distribution operations, cyber security 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 this Annual Report on Form 10-K 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. Therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other
person that our objectives and plans will be achieved. We assume no obligation to update any forward-looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In the normal course of business, our financial position and results of operations are routinely subject to a variety of risks, including market risk associated with interest rate
movements on borrowings and currency rate movements on non-U.S. dollar denominated assets, liabilities and cash flows. We are also subject to commodity pricing risk via
changes in the price of materials used in our manufacturing process. We regularly assess these risks and have established policies and business practices that should mitigate
a portion of the adverse effect of these and other potential exposures.
Interest Rate Risk
Our primary exposure to market risk includes interest rate fluctuations in connection with our Term Facility and ABL Facility. Our Term and ABL Facilities are tied to
changes in applicable interest rates, including SOFR and total borrowings under our ABL Facility.
As of December 31, 2024, we had $131.0 million of debt consisting of $35.1 million under our Term Facility and $95.9 million under our ABL Facility. For additional
information about our credit facilities see Note 10 - Long-Term Debt of our Consolidated Financial Statements.
We do not hold any market risk sensitive instruments for trading purposes.
We do not have any interest rate management agreements as of December 31, 2024.
Commodity Risk
We are also exposed to changes in the price of commodities used in our manufacturing operations. However, commodity price risk related to our current commodities is not
material as price changes in commodities can generally be passed along to the customer.
Foreign Exchange Risk
Our business operates internationally, and we are therefore exposed to foreign exchange risk impacts when we transact in a currency other than the USD, our entities
functional currency. We regularly assess this risk and have established policies and business practices in place that should mitigate a portion of the adverse effect of the
exposure if and when it becomes material.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ROCKY BRANDS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Description
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 34)
27
Report of Independent Registered Public Accounting Firm (PCAOB ID: 358)
29
Consolidated Balance Sheets as of December 31, 2024 and 2023
30
Consolidated Statements of Operations for the Years Ended December 31, 2024, 2023, and 2022
31
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2024, 2023, and 2022
32
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023, and 2022
33
Note 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
34
Note 2. ACCOUNTING STANDARDS UPDATES
37
Note 3. SALE OF SERVUS BRAND AND RELATED ASSETS
37
Note 4.SALE OF NEOS BRAND AND RELATED ASSETS
37
Note 5. INVENTORIES
37
Note 6. PROPERTY, PLANT, AND EQUIPMENT
38
Note 7. GOODWILL AND OTHER INTANGIBLE ASSETS
38
Note 8. OTHER ASSETS
40
Note 9. ACCRUED EXPENSES AND OTHER LIABILITIES
40
Note 10. LONG-TERM DEBT
40
Note 11. LEASES
43
Note 12. BENEFIT PLAN
44
Note 13. TAXES
44
Note 14. SHAREHOLDERS' EQUITY
46
Note 15. SHARE-BASED COMPENSATION
46
Note 16. EARNINGS PER SHARE
47
Note 17. REVENUE
48
Note 18. SUPPLEMENTAL CASH FLOW INFORMATION
50
Note 19. SEGMENT INFORMATION
50
Note 20. COMMITMENTS AND CONTINGENCIES
51
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Rocky Brands, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Rocky Brands, Inc. and subsidiaries (the “Company”) as of December 31, 2024, the related consolidated
statement of operations, shareholders’ equity, and cash flows, for the period ended December 31, 2024, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results
of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over
financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated March 17, 2025, expressed an unqualified opinion on the Company's internal control over financial
reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on
our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our
opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be
communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we
are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
27
Table of Contents
Goodwill and Other Intangible Assets - Wholesale and Retail Reporting Units and Muck Trademark – Refer to Notes 1 and 7 to the financial statements
Critical Audit Matter Description
The Company's evaluation of goodwill and indefinite-lived intangible assets for impairment involves the comparison of the fair value of each reporting unit or asset to its
respective carrying values.
The Company uses a combination of the income and market approaches to estimate the fair value of its reporting units in its goodwill impairment analysis. The income
approach requires management to estimate a number of factors for each reporting unit, including forecasts of future revenues, EBITDA margins, and discount rates. The
market approach requires management to estimate fair value using comparable marketplace fair value data from within a comparable industry grouping or a comparable
marketplace transactional multiple.
The Company uses the relief from royalty method to estimate the fair value of the indefinite-lived intangible assets trademark. This method estimates the fair value of an
intangible asset by determining the present value of the cost savings realized by the owner of the intangible asset as a result of not having to pay a stream of royalty
payments to another party.
The selection of companies in the comparable industry group for the reporting units and changes in business and valuation assumptions for both the reporting units and the
Muck trademark could have a significant impact on the valuation of the reporting units or the Muck trademark and the amount of a goodwill or indefinite-lived
trademark impairment charge, if any.
The Company performed its annual impairment assessment of the Muck trademark as of December 31, 2024 and determined that the fair value of the Muck indefinite-lived
intangible asset was less than its carrying amount. As a result, the Company recorded an impairment charge of $4.0 million to reduce the carrying amount to be equivalent to
the estimated fair value of $37.9 million as of December 31, 2024.
We identified the valuation of the Wholesale and Retail reporting units and the Muck trademark indefinite-lived intangible asset as a critical audit matter due to the
materiality of the assets' carrying values, the difference between the fair values and the carrying values of the reporting units, the sensitivity of the fair value calculation to
changes in significant assumptions, and because of the underperformance compared to historical forecasts at each of the businesses.
Auditing management's judgments used in the quantitative assessment regarding significant assumptions such as future revenue growth, EBITDA margins, the selection of
discount rates, and the selection of royalty rates requires a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value
specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the fair value of goodwill for the Wholesale and Retail reporting units and the Muck trademark indefinite-lived intangible asset included the
following, among others:
●
We tested the effectiveness of controls over the goodwill and indefinite-lived intangible asset impairment analyses, including those over the development of significant
assumptions such as future revenue growth, EBITDA margins, discount rates, and royalty rates.
●
We evaluated the reasonableness of management's forecasted future revenue growth and EBITDA margins by comparing historical forecasts to actual results and
comparing future forecasts to business strategies, growth plans, and third-party economic and industry data.
●
With the assistance of our fair value specialists, we evaluated the discount rate and royalty rate used by the Company in developing the fair value estimates by testing
the source information underlying the determination of the discount rate and royalty rate and by developing a range of independent estimates for the discount rate and
royalty rate.
/s/ DELOITTE & TOUCHE LLP
Columbus, Ohio
March 17, 2025
We have served as the Company's auditor since 2024.
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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
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Rocky Brands, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share amounts)
December 31,
December 31,
2024
2023
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents
$
3,719 $
4,470
Trade receivables – net
71,983
77,028
Contract receivables
-
927
Other receivables
1,028
1,933
Inventories – net
166,701
169,201
Income tax receivable
-
1,253
Prepaid expenses
3,008
3,361
Total current assets
246,439
258,173
LEASED ASSETS
6,030
7,809
PROPERTY, PLANT & EQUIPMENT – net
49,666
51,976
GOODWILL
47,844
47,844
IDENTIFIED INTANGIBLES – net
105,823
112,618
OTHER ASSETS
1,498
965
TOTAL ASSETS
$
457,300 $
479,385
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable
$
58,069 $
49,840
Contract liabilities
-
927
Current portion of long-term debt
8,361
2,650
Accrued expenses and other liabilities
23,977
18,112
Total current liabilities
90,407
71,529
LONG-TERM DEBT
120,376
170,480
LONG-TERM TAXES PAYABLE
-
169
LONG-TERM LEASES
3,537
5,461
DEFERRED INCOME TAXES
10,044
7,475
DEFERRED LIABILITIES
712
716
TOTAL LIABILITIES
225,076
255,830
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and outstanding December 31, 2024 - 7,454,465; December 31, 2023 -
7,412,480
73,866
71,973
Retained earnings
158,358
151,582
Total shareholders' equity
232,224
223,555
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
457,300 $
479,385
See notes to Consolidated Financial Statements
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Rocky Brands, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
Year Ended
December 31,
2024
2023
2022
NET SALES
$
453,772 $
461,833 $
615,475
COST OF GOODS SOLD
274,762
283,235
390,256
GROSS MARGIN
179,010
178,598
225,219
OPERATING EXPENSES
147,944
143,226
181,181
INCOME FROM OPERATIONS
31,066
35,372
44,038
INTEREST EXPENSE AND OTHER – net
(17,008)
(21,218)
(18,270)
INCOME BEFORE INCOME TAX EXPENSE
14,058
14,154
25,768
INCOME TAX EXPENSE
2,671
3,728
5,303
NET INCOME
$
11,387 $
10,426 $
20,465
INCOME PER SHARE
Basic
$
1.53 $
1.42 $
2.80
Diluted
$
1.52 $
1.41 $
2.78
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic
7,437
7,363
7,317
Diluted
7,480
7,381
7,369
See notes to Consolidated Financial Statements
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Table of Contents
Rocky Brands, Inc. and Subsidiaries
Consolidated Statement of Shareholders’ Equity
(In thousands, except per share amounts)
Common Stock and
Additional Paid-in Capital
Total
Shares
Retained
Shareholders'
Outstanding
Amount
Earnings
Equity
BALANCE - December 31, 2021
7,302 $
68,061 $
129,794 $
197,855
Net income
$
20,465 $
20,465
Dividends paid on common stock ($0.62 per share)
(4,538)
(4,538)
Stock issued for options exercised, including tax benefits
26 $
461
-
461
Stock compensation expense
11
1,230
-
1,230
BALANCE - December 31, 2022
7,339 $
69,752 $
145,721 $
215,473
Net income
$
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
34
1,244
-
1,244
BALANCE - December 31, 2023
7,412 $
71,973 $
151,582 $
223,555
Net income
$
11,387 $
11,387
Dividends paid on common stock ($0.62 per share)
(4,611)
(4,611)
Stock issued for options exercised, including tax benefits
22 $
599
-
599
Stock compensation expense
20
1,294
-
1,294
BALANCE - December 31, 2024
7,454 $
73,866 $
158,358 $
232,224
See notes to Consolidated Financial Statements
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Table of Contents
Rocky Brands, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Year Ended
December 31,
2024
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
11,387 $
10,426 $
20,465
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
10,251
10,939
12,320
Intangible impairment charge
4,000
-
-
Noncash lease expense
2,619
-
-
Provision for bad debts
1,679
451
3,254
Stock compensation expense
1,294
1,244
1,230
Loss on term loan extinguishment
1,111
-
-
Amortization of debt issuance costs
611
853
853
Gain on sale of business
-
(1,341)
-
Deferred income taxes
2,569
(531)
(2,209)
Loss (gain) on disposal of assets
-
231
(789)
Change in assets and liabilities:
Receivables
2,572
18,150
28,222
Contract receivables
927
(927)
1,062
Inventories
2,500
60,034
(4,986)
Other current assets
353
706
440
Other assets
(107)
3,182
389
Accounts payable
7,745
(21,228)
(45,921)
Operating lease liability
(2,619)
-
-
Accrued and other liabilities
5,154
(7,115)
468
Income taxes
1,645
(2,425)
5,387
Contract liabilities
(927)
927
(1,062)
Net cash provided by operating activities
52,764
73,576
19,123
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets
(4,663)
(3,918)
(6,702)
Proceeds from the sale of assets
-
-
5,468
Proceeds from sale of business
1,700
17,300
-
Net cash (used in) provided by investing activities
(2,963)
13,382
(1,234)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility
139,801
55,681
37,492
Repayments on revolving credit facility
(139,713)
(101,900)
(40,263)
Proceeds from term loan
50,000
-
-
Repayments on term loan
(94,295)
(38,400)
(11,231)
Debt issuance costs
(2,333)
-
-
Proceeds from stock options
599
977
461
Dividends paid on common stock
(4,611)
(4,565)
(4,538)
Net cash used in financing activities
(50,552)
(88,207)
(18,079)
DECREASE IN CASH AND CASH EQUIVALENTS
(751)
(1,249)
(190)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD
4,470
5,719
5,909
END OF PERIOD
$
3,719 $
4,470 $
5,719
See notes to Consolidated Financial Statements
33
Table of Contents
ROCKY BRANDS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The accompanying Consolidated Financial Statements include the accounts of Rocky Brands, Inc. ("Rocky Brands") and its wholly-owned
subsidiaries, Lifestyle Footwear, Inc. ("Lifestyle"), Five Star Enterprises Ltd. ("Five Star"), Rocky Brands US, LLC, Rocky Brands International, LLC, Lehigh Outfitters,
LLC, US Footwear Holdings, LLC, Rocky Brands (Australia) Pty Ltd., Mexico FW Holdings, S. de R.L. de C.V., Rocky Footwear (Chuzhou) Co. 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. Our brands have a long history of representing high quality,
comfortable, functional and durable footwear and our products are organized around six target markets: work, outdoor, western, commercial military, duty and military. In
addition, as part of our strategy of outfitting consumers from head-to-toe, we market complementary branded apparel and accessories that we believe leverage the strength
and positioning of each of our brands.
Our products are distributed through three distinct business segments: Wholesale, Retail and Contract Manufacturing. Wholesale includes sales of footwear and accessories
to several classifications of retailers, including sporting goods stores, outdoor specialty stores, online retailers, marine stores, independent retailers, mass merchants, retail
uniform stores and specialty safety shoe stores. Our Retail business includes direct sales of our products to consumers through our e-Commerce websites, third-party
marketplaces, our Rocky Outdoor Gear Store and Lehigh businesses. Contract Manufacturing includes sales to the U.S. Military, private label sales and any sales to
customers in which we are contracted to manufacture or source a specific footwear product for a customer. See Note 19 - Segment Information for further information.
Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency - We have determined that the functional currency for our international subsidiaries is the USD as this is the currency in which the entities primarily
generate and expend cash. Monetary assets and liabilities that are in a currency other than the USD are remeasured at the rate prevailing at year end. Revenue and expenses
in a foreign currency are remeasured at rates that approximate those in effect at the time of remeasurement. Resulting gains and losses from remeasuring the foreign
currency to the USD are included in net income. Foreign currency transaction gains and losses are not material for any period presented.
Cash and Cash Equivalents - We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Balances may
exceed federally insured limits. We also hold cash outside of the U.S. that is not federally insured.
Allowance for Credit Losses - We maintain an allowance for credit losses resulting from the inability of our customers to make required payments. We calculate the
allowance based on historical experience, the age of the receivables, receivable insurance status, and identification of customer accounts that are likely to prove difficult to
collect due to various criteria including pending bankruptcy. Estimates of the allowance in any future period are inherently uncertain and actual allowances may differ from
these estimates. If actual or expected future allowances were significantly greater or less than established reserves, a reduction or increase to bad debt expense would be
recorded in the period this determination was made. Our credit policy generally provides that trade receivables will be deemed uncollectible and written-off once we have
pursued all reasonable efforts to collect on the account. Trade receivables are presented net of the related allowance for credit losses of approximately $1.0 million and
$1.8 million at December 31, 2024 and 2023, respectively.
Concentration of Credit Risk - We have significant transactions with a large number of customers. No customer represented 10% of net trade receivables as of December
31, 2024 and 2023. 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.
Supplier and Labor Concentrations- We purchase raw materials from a number of domestic and foreign sources. We produce a portion of our shoes and boots in our
Dominican Republic, Puerto Rico and China operations. 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 are not aware of any governmental or
economic restrictions that would alter our current sourcing operations.
Inventories - Inventories are valued at the lower of cost or net realizable value, on a first-in, first-out (FIFO) basis. We reduce the carrying value of inventories to the lower
of cost or net realizable value for excess and obsolete inventories based upon assumptions about future demand and market conditions. If we estimate the net realizable
value of our inventory is less than the cost of the inventory, we record an adjustment equal to the difference between the cost of the inventory and the estimated net
realizable value. The adjustment is recorded as a charge to cost of goods sold. If changes in demand or market conditions result in reductions to the estimated net realizable
value of our inventory below our previous estimate, we would further adjust the value of our inventory in the period in which we made such a determination.
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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:
Years
Buildings and improvements
5 - 39
Machinery and equipment
3 - 8
Furniture and fixtures
3 - 8
Lasts, dies, and patterns
3
For income tax purposes, we generally compute depreciation utilizing accelerated methods.
Goodwill and Other Intangible Assets - Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets. Indefinite-
lived intangibles include trademarks and trade names. 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.
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. An impairment charge is recorded if the carrying value of the reporting unit exceeds its estimated fair value. An indefinite-lived intangible
asset is quantitatively evaluated for possible impairment by comparing the estimated fair value of the asset with its carrying value. An impairment charge is recorded if the
carrying value of the asset exceeds its estimated fair value.
Other intangible assets determined to have a finite life primarily consist of customer relationships and patents, which are amortized over their estimated useful lives using
straight-line amortization. We review intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the related carrying
amounts may not be recoverable. Determining whether an impairment loss occurred requires a comparison of the carrying amount to the sum of the future forecasted
undiscounted cash flows expected to be generated by the asset group.
For additional details on goodwill and intangible assets, including information related to our annual test, see Note 7 - Goodwill and Other Intangible Assets.
Leases - Our leases primarily consist of office buildings, distribution centers, manufacturing facilities and equipment. We lease assets in the normal course of business to
meet our current and future needs while providing flexibility to our operations. We enter into contracts with third parties to lease specifically identified assets. The
Company's incremental borrowing rate is used to determine the present value of future lease payments unless the implicit rate is readily determinable. Most of our leases
have contractually specified renewal periods. Our operating leases expire at various dates through 2029 and contain various provisions for rental adjustments and renewal
provisions for varying periods. We determine the lease term for each lease based on the terms of each contract and factor in renewal and early termination options if such
options are reasonably certain to be exercised.
We have elected the practical expedient to account for lease components and nonlease components associated with individual leases as a single lease component for all
leases. In addition, we have elected to account for multiple lease components as a single lease component. Our leases may include variable lease costs such as payments
based on changes to an index, payments based on a percentage of retail store sales, and maintenance, utilities, shared marketing or other service costs that are paid directly
to the lessor under terms of the lease. We recognize variable lease payments when the amounts are incurred and determinable. We have elected to account for leases of
twelve months or less as short-term leases and accordingly do not recognize a right-of-use asset or lease liability for these leases. We recognize lease expense for these
leases on a straight-line basis over the lease term.
Comprehensive Income - Comprehensive income includes changes in equity that result from transactions and economic events from non-core operations. Comprehensive
income is composed of two subsets – net income and other comprehensive income. There were no material other comprehensive income items, and, therefore, no
Statements of Comprehensive Income were presented.
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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. Payment terms vary by sales channel and customer. For our wholesale channel and our Lehigh business-to-business channel, terms
generally require the customer pay within 30 to 60 days of product shipment. For our retail store, e-Commerce channel, and third-party marketplace channel, payment is due
at the time of sale.
Cost of Goods Sold - Cost of goods sold represents our costs to manufacture products in our own facilities, including raw materials costs and all overhead expenses related
to production, as well as the cost to purchase finished products from our third-party manufacturers. Cost of goods sold also includes the cost to transport these products to
our distribution centers.
Advertising - We expense advertising costs as incurred. Advertising expense was approximately $ 19.9 million, $ 16.6 million and $ 15.4 million for 2024 , 2023 and
2022 , respectively.
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.
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. Stock-based compensation is included in operating expenses in the consolidated statements of operations.
Fair Value Measurements - The fair value accounting standard defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair
value measurements. This standard clarifies how to measure fair value as permitted under other accounting pronouncements.
The fair value accounting standard defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. This standard also establishes a three-
level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the
use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
●
Level 1 – Quoted prices in active markets for identical assets or liabilities.
●
Level 2 – Observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted
prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market
data.
●
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes
certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The fair values of cash and cash equivalents, receivables, and payables approximated their carrying values because of the short-term nature of these instruments.
Receivables consist primarily of amounts due from our customers, net of allowances, 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.
Some assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. These assets primarily include
goodwill and other indefinite lived intangible assets that have been reduced to fair value when impaired. Assets that are written down to fair value when impaired are not
subsequently adjusted to fair value unless further impairment occurs. We incurred $4.0 of impairment relating to our trademarks during the year ended December 31, 2024,
to write-down the carrying value of the Muck trademark to the fair value of the asset.
Deferred Compensation Plan Assets and Liabilities - On December 14, 2018, our Board of Directors adopted the Rocky Brands, Inc. Executive Deferred Compensation
Plan (the "Executive Deferred Compensation Plan"), which became effective January 1, 2019. The Executive Deferred Compensation Plan is a nonqualified deferred
compensation plan in which certain executives are eligible to participate. The deferrals are held in a separate trust, which has been established for the administration of the
Executive Deferred Compensation Plan. 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).
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Table of Contents
2. 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:
Standard
Description
Anticipated Adoption Periods
Effect on Consolidated Financial
Statements
ASU 2023-09, Income Taxes (Topic 740):
Improvements to Income Tax Disclosures
This pronouncement requires expanded
income tax disclosures primarily related to
an entity's effective tax rate reconciliation
and income taxes paid.
Q4 2025
The Company is still assessing the
impact of the new accounting standard
but does not expect the adoption of this
standard to have a material impact on
its consolidated financial statements.
ASU 2024-03, Income Statement -
Reporting Comprehensive Income -
Expense Disaggregation Disclosures
(Subtopic 220-40): Disaggregation of
Income Statement Expenses
This pronouncement requires expanded
disclosures on comprehensive income to
improve expenses and address requests from
investors for more detailed information
about the types of expenses.
Q4 2027 (fiscal year) Q1 2028
(interim period)
The Company is still assessing the
impact of the new accounting standard
on its consolidated financial
statements.
Accounting Standards Adopted in Current Year
Standard
Description
Effect on the financial statements or other significant
matters
ASU 2023-07, Segment Reporting (Topic 280):
Improvements to Reportable Segment Disclosures
This pronouncement requires expanded disclosures
about an entity’s reportable segments, including more
enhanced information about a reportable segment’s
expenses, interim segment profit or loss, and how an
entity’s chief operating decision maker uses reported
segment profit or loss information in assessing segment
performance and allocating resources.
The Company has included all required disclosures
within its Form 10-K for the year ended December 31,
2024. See Note 19 for further information on segment
disclosures.
3. 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.
4. 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 $0.7 million recorded in
the accompanying consolidated statement of operations for the twelve months ended December 31, 2022.
5. INVENTORIES
Inventories are comprised of the following:
December 31,
December 31,
($ in thousands)
2024
2023
Finished goods
$
149,328 $
151,515
Raw materials
16,671
16,774
Work-in-process
702
912
Total
$
166,701 $
169,201
The asset associated with our returns reserve included within inventories was approximately $0.9 million and $0.8 million at December 31, 2024 and December 31, 2023,
respectively.
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6. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is comprised of the following:
December 31,
December 31,
($ in thousands)
2024
2023
Machinery and equipment
$
61,956 $
61,148
Buildings
37,657
37,581
Lasts, dies and patterns
11,806
11,271
Furniture and fixtures
1,548
2,006
Less - accumulated depreciation
(75,242)
(69,455)
Total
37,725
42,551
Construction work-in-progress
10,969
8,453
Land
972
972
Net Fixed Assets
$
49,666 $
51,976
We incurred approximately $7.5 million, $8.1 million and $9.2 million in depreciation expense for 2024, 2023 and 2022, respectively.
7. 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. 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. When performing the income approach, we utilize the present value of cash flows to estimate fair value. The future cash flows for our
reporting units were projected based on our estimates, at that time, of future revenues, EBITDA, and other factors (such as working capital and capital expenditures). The
discount rates used were based on a weighted-average cost of capital determined from relevant market comparisons and take into consideration the risk and nature of the
respective reporting unit's cash flows. For the market approach, we use the guideline public company method which relies upon valuation multiples derived from stock
prices and enterprise values of publicly traded companies that are comparable to the reporting unit being evaluated. To further confirm fair value, we compare the aggregate
fair value of our reporting units to our total market capitalization. After completing our annual goodwill impairment test for our Wholesale and Retail reporting units during
the fourth quarter of 2024 and 2023, we concluded there was no impairment in either of these years.
The fair value of our indefinite-lived intangibles, which consist of trademarks, was determined based on the income approach using the relief from royalty method. This
method requires us to estimate the future revenues for the related brands, the appropriate royalty rate, and the weighted-average cost of capital. In the fourth quarter of 2024,
after completing our annual impairment test for our indefinite-lived intangible assets, we recognized a $4.0 million impairment charge related to the Muck trademark. The
impairment charge for the Muck trademark was due to a reduction in the assigned royalty rate as a result of changes in projected revenue growth. There was no impairment
charge for indefinite-lived intangible assets recorded during the year end December 31, 2023.
We consider the assumptions used in our determination of the estimated fair value of our reporting units and indefinite-lived intangible assets to be reasonable and
comparable to those that would be used by other third-party marketplace participants; however, actual events and results could differ substantially from the estimates used in
our valuations. These assumptions include, among other things, estimating future cash flows, including projected revenue and operating results, as well as selecting
appropriate discount rates, pricing multiples, and an assumed royalty rate. If an event occurs that would cause us to revise our estimates and assumptions used in analyzing
the fair value of our goodwill and other intangible assets, the revision could result in a non-cash impairment charge that could have a material impact on our financial
results.
Estimates utilized in the projected cash flows include consideration of macroeconomic conditions, expected growth rates, cost containment and margin expansion, business
plans, market position, and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances such as supply chain disruptions
and the loss of key customers could negatively affect key assumptions used for the recent fair value test and potentially result in goodwill and/or intangible
assets impairment.
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Table of Contents
The changes in the carrying amount of goodwill are as follows:
($ in thousands)
2024
2023
Goodwill balance at beginning of the year (1)
$
47,844 $
50,246
Sale of Business (2)
-
(2,402)
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 reporting segments was $23.0 million and $24.8 million, respectively.
No goodwill was allocated to our Contract Manufacturing segment for either period presented.
(2) Relates to the divesture of the Servus brand during the year ended December 31, 2023, Note 3 - Sale of Servus Brand and Related Assets for additional information.
A schedule of identified intangible assets is as follows:
December 31, 2024
Gross
Accumulated
Accumulated
Carrying
($ in thousands)
Amount
Amortization
Impairment
Amount
Indefinite-lived intangible assets
Trademarks (1)
$
78,654
$
(4,000)
74,654
Intangible assets subject to amortization
Patents
895 $
(863)
-
32
Customer relationships
41,659
(10,522)
-
31,137
Total Intangible assets other than goodwill
$
121,208 $
(11,385) $
(4,000) $
105,823
(1) As of December 31, 2024, the Trademark impairment related to our Wholesale and Retail reporting segments was $3.6 million and $0.4 million, respectively.
December 31, 2023
Gross
Accumulated
Carrying
($ in thousands)
Amount
Amortization
Amount
Indefinite-lived intangible assets
Trademarks
$
78,654
$
78,654
Intangible assets subject to amortization
Patents
895 $
(845)
50
Customer relationships
41,659
(7,745)
33,914
Total Intangible assets other than goodwill
$
121,208 $
(8,590) $
112,618
The weighted average life of patents and customer relationships is 3.1 years and 11.3 years, respectively.
Amortization expense for intangible assets subject to amortization for the twelve months ended December 31, 2024, 2023 and 2022 was $2.8 million, $2.9 million and $3.1
million, respectively.
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A schedule of approximate expected remaining amortization expense related to finite-lived intangible assets for the years ending December 31 is as follows:
Amortization
($ in thousands)
Year
Expense
2025 $
2,790
2026
2,788
2027
2,785
2028
2,781
2029
2,779
2030+
17,246
Total $
31,169
8. OTHER ASSETS
Other assets consist of the following:
December 31,
December 31,
($ in thousands)
2024
2023
Long-term deposits
$
567 $
556
Deferred loan fees
476
-
NQDC plan assets
455
409
Total
$
1,498 $
965
9. ACCRUED EXPENSES AND OTHER LIABILITIES
Amounts reported in "Accrued expenses and other liabilities" within the accompanying Consolidated Balance Sheets were:
December 31,
December 31,
($ in thousands)
2024
2023
Accrued Expenses and other liabilities:
Accrued duties
$
6,807 $
5,440
Accrued freight
3,244
2,284
Salaries and wages
3,220
1,204
Operating lease liability
2,772
2,679
Returns liability
1,754
-
Accrued advertising
1,406
1,877
Taxes - other
965
925
Commissions
828
904
Income taxes payable
562
-
Accrued interest
-
2,104
Other
2,419
695
Total accrued expenses and other liabilities
$
23,977 $
18,112
10. LONG-TERM DEBT
On April 26, 2024, we refinanced our existing debt by amending and restating our credit agreement with Bank of America, N.A., as agent, sole lead arranger and sole
bookrunner and other lenders party thereto (the "ABL Agreement"). The ABL Agreement consists of a $175.0 million asset-based lending credit facility (the "ABL
Facility") and a $50.0 million term loan facility (the "Term Facility"). The ABL Agreement is collateralized by a first-lien on substantially all of the Company's
domestic assets. The ABL Facility includes a separate first in, last out (FILO) tranche, which allows the Company to borrow at higher advance rates on eligible accounts
receivables and inventory balances. As of December 31, 2024, we had borrowing capacity of $55.9 million under the ABL Facility. The Term Facility provides for monthly
principal payments until the date of maturity, at which date the remaining principal balance is due.
This transaction resulted in a $2.6 million expense within Interest Expense and Other - net in the accompanying Consolidated Statements of Operations, consisting of
a $1.1 million loss on term loan extinguishment and a $1.5 million term loan prepayment penalty for the twelve months ended December 31, 2024. The $1.1 million loss
on term loan extinguishment is included as a noncash adjustment to net income and the $1.5 million prepayment penalty is included within Repayments of long-term debt in
the accompanying Consolidated Statements of Cash Flows for the twelve months ended December 31, 2024.
Loans under the ABL Agreement bear interest at a variable rate equal to either (i) the Base Rate (as calculated in the ABL Agreement) or (ii) Term SOFR (as calculated in
the ABL Agreement), plus in each case an interest margin determined by the Company's average daily availability as a percentage of the aggregate amount of revolving
commitments for revolving loans and term loans, with a range of Base Rate margins and term SOFR margins, as set forth of the following chart:
Revolver
Pricing
Level(1)
Average Availability as a
Percentage of Commitments
Term SOFR
Term Loan
Base Rate Term
Loan
Term SOFR
Revolver Loan
Base Rate
Revolver Loan
Term SOFR
FILO Loan
Base Rate FILO
Loan
I
> 66.7%
2.75%
1.50%
1.25%
0.00%
1.75%
0.50%
II
>33.3% and < or equal to
66.7%
3.00%
1.50%
1.50%
0.00%
2.00%
0.50%
III
< or equal to 33.3%
3.25%
1.75%
1.75%
0.25%
2.25%
0.75%
In connection with the ABL Agreement, we paid certain fees that were capitalized and will be amortized over the life of such agreement.
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Current and long-term debt under the ABL Agreement consisted of the following as of December 31, 2024:
December 31,
($ in thousands)
2024
Term Facility that matures in 2029 with an effective interest rate of 10.47%
$
35,123
ABL Facility that matures in 2029:
SOFR borrowings with an effective interest rate of 6.24%
91,300
Prime borrowings with an effective interest rate of 7.77%
4,577
Total debt
131,000
Less: Unamortized debt issuance costs
(2,263)
Total debt, net of debt issuance costs
128,737
Less: Debt maturing within one year
(8,361)
Long-term debt
$
120,376
A schedule of debt payments for the next five years is as follows:
Debt Payment
($ in thousands)
Year
Schedule
2025
8,361
2026
8,361
2027
8,361
2028
8,361
2029
97,556
Total
131,000
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.
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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
Base Rate
Term SOFR
Loan
Base Rate for FILO
Term SOFR FILO
Loans
I
> 66.7%
0.00%
1.25%
0.50%
1.75%
II
>33.3% and < or equal to 66.7%
0.00%
1.50%
0.50%
2.00%
III
< or equal to 33.3%
0.25%
1.75%
0.75%
2.25%
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 $75,000 due on each anniversary of the issuance date,
until it matured.
Current and long-term debt under the Original ABL Facility and TCW Term Facility consisted of the following as of December 31, 2023:
December 31,
($ in thousands)
2023
TCW Term Facility refinanced in April 2024 with an effective interest rate of 13.20%
$
77,932
Original ABL Facility amended and restated in April 2024:
SOFR borrowings with an effective interest rate of 7.31%
83,144
Prime borrowings with an effective interest rate of 8.75%
13,938
Total debt
175,014
Less: Unamortized debt issuance costs
(1,884)
Total debt, net of debt issuance costs
173,130
Less: Debt maturing within one year
(2,650)
Long-term debt
$
170,480
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.
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11. LEASES
The following is a summary of the Company's lease cost:
December 31,
December 31,
December 31,
($ in thousands)
2024
2023
2022
Operating lease cost
$
2,896 $
4,019 $
3,175
Short-term lease cost
1,205
504
2,166
Total lease cost
$
4,101 $
4,523 $
5,341
Variable lease costs for the year ending December 31, 2024 was approximately $0.4 million.
The following is a summary of the Company's supplemental cash flow information related to leases:
December 31,
December 31,
December 31,
($ in thousands)
2024
2023
2022
Cash paid for operating lease liabilities
$
2,921 $
2,853 $
1,492
Operating lease assets obtained in exchange for lease liabilities
$
869 $
628 $
2,786
The weighted-average discount rate for operating leases as of December 31, 2024 is 3.2%. The weighted-average remaining lease term for operating leases as of December
31, 2024 is 2.4 years. Future undiscounted cash flows for operating leases for the fiscal periods subsequent to December 31, 2024 are as follows:
Operating
($ in thousands)
Year
Leases
2025 $
2,943
2026
2,574
2027
758
2028
300
2029
68
Total lease payments
6,643
Less: Interest
(334)
Present value of lease liabilities $
6,309
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12. BENEFIT PLAN
We sponsor a 401(k) savings plan for eligible employees. We provide a contribution of 3.0% of applicable salary to the plan for all eligible full-time employees with greater
than six months of service. Additionally, we match eligible employee contributions at a rate of 25.0% up to the first 4.0% of eligible compensation that is deferred. This
matching contribution will be made by us up to a maximum of 1.0% of the employee’s applicable salary for all qualified employees.
Our approximate contributions to the 401(k) Plan were as follows:
($ in thousands)
2024
2023
2022
401k plan sponsor contributions
$
1,392 $
1,531 $
1,798
Deferred Compensation Plans
The Executive Deferred Compensation Plan, which became effective January 1, 2019, is an unfunded non-qualified deferred compensation plan in which certain executives
are eligible to participate.
Under the Executive Deferred Compensation Plan, participants may elect to defer up to 75% of their base compensation and up to 100% of their bonuses, commissions, and
other compensation. The deferred amounts are paid in accordance with each participant’s elections made on or before December 31 of the prior year. In addition to elective
deferrals, the Executive Deferred Compensation Plan permits the Company to make discretionary contributions to eligible participants, provided that any participant who is
employed on the last day of a plan year will receive a Company contribution equal to no less than 3% of the participant’s base compensation, bonus earned, and non-equity
incentive plan compensation in the plan year. Company contributions will vest in accordance with the vesting schedule determined by the Committee, except in the event of
the participant’s death, disability or retirement, in which case the contributions will vest 100% upon such event. Participants may elect to receive payment in a lump sum
cash payment or, in the event of the participant’s retirement, in annual installments for a period of up to ten years. In the event of a participant’s termination of employment,
deferred amounts will generally be paid within 60 days following the later of the date (i) of such termination or (ii) the participant attains age 60, except where such
termination is due to such participant’s death, in which case deferred amounts will be paid to such participant’s beneficiary within 30 days of confirmation of the
participant’s death.
The deferrals are held in a separate trust, which has been established by the Company to administer the Executive Deferred Compensation Plan. The assets of the trust are
subject to the claims of the Company’s creditors in the event that the Company becomes insolvent. Consequently, the trust qualifies as a grantor trust for income tax
purposes (i.e., a "Rabbi Trust"). The assets held by the trust were approximately $0.5 million and $0.4 million as of December 31, 2024 and December 31, 2023,
respectively, and are classified as trading securities within other assets in the accompanying consolidated balance sheets. The liabilities held under the Executive Deferred
Compensation Plan were approximately $0.2 million as of December 31, 2024 and December 31, 2023, and are classified within deferred liabilities in the accompanying
consolidated balance sheets. Changes in the deferred compensation assets and liabilities are charged to operating expenses in the accompanying consolidated statements of
operations.
In 2020, we entered into a second deferred compensation plan (the "Dominican Plan"), which became effective August 18, 2020 and is a non-qualified deferred
compensation plan for certain key employees at our Dominican Republic manufacturing facility.
Under the Dominican Plan, key employees will receive a set dollar amount, as defined in the agreement, at the later of five years following the effective date of the
agreement or upon the employee attaining the age of 65. Payments are due within 30 days of the employee's retirement. If the employee terminates their employment, for
any reason, prior to their retirement and five years after the effective date of the agreement, the employee is not eligible to receive a payout. 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 $0.3 million as of
December 31, 2024 and December 31, 2023, respectively, and are classified within deferred liabilities in the accompanying consolidated balance sheets.
13. TAXES
We use the asset and liability method of accounting for income taxes based on ASC 740, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities
are based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the period in which the differences are
expected to reverse Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the asset will not be realized.
A breakdown of our income tax expense (benefit) for the years ended December 31 is as follows:
($ in thousands)
2024
2023
2022
Federal:
Current
$
(926) $
3,877 $
5,993
Deferred
2,337
(977)
(1,417)
Total federal
1,411
2,900
4,576
State & local:
Current
140
262
1,415
Deferred
148
123
(247)
Total state & local
288
385
1,168
Foreign
Current
878
106
182
Deferred
94
337
(623)
Total foreign
972
443
(441)
Total
$
2,671 $
3,728 $
5,303
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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,
($ in thousands)
2024
2023
2022
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
399
190
316
State and local income taxes
227
407
734
Tax rate differential effect of foreign operations
230
106
160
Permanent differences
165
69
11
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)
Total
$
2,671 $
3,728 $
5,303
Deferred income taxes recorded in the Consolidated Balance Sheets at December 31, 2024 and 2023 consisted of the following:
($ in thousands)
2024
2023
Deferred tax assets:
Inventories
$
3,640 $
2,428
Lease assets
1,252
1,853
Asset valuation allowances and accrued expenses
957
967
Transaction costs
608
684
Net operating losses
318
866
163(J) Interest limitation
262
4,644
State and local income taxes
195
305
Pension and deferred compensation
56
54
Total deferred tax assets
7,288
11,801
Valuation allowances
(155)
(355)
Total deferred tax assets
7,133
11,446
Deferred tax liabilities:
Intangible assets
11,908
11,713
Fixed assets
3,231
4,166
Lease liabilities
1,195
1,786
Other assets
587
748
Tollgate tax on Lifestyle earnings
228
228
State and local income taxes
28
280
Total deferred tax liabilities
17,177
18,921
Net deferred tax liability
$
10,044 $
7,475
The valuation allowance as of December 31, 2024 is related to certain foreign income tax net operating loss carry forwards.
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. In 2001, we received abatement for Puerto Rico tollgate taxes on all earnings subsequent to
June 30, 1994; thus no other provision for tollgate tax has been made on earnings after that date. If we repatriate the earnings from Lifestyle, $0.2 million of tollgate tax
would be due as of December 31, 2024.
We are subject to tax examinations in various taxing jurisdictions. The earliest exam years open for examination are as follows:
Earliest Exam Year
Taxing authority jurisdiction:
U.S. federal
2021
Various U.S. states
2020
Puerto Rico (U.S. territory)
2019
Canada
2019
China
2021
Mexico
2021
United Kingdom
2022
Australia
2022
Our policy is to accrue interest and penalties on any uncertain tax position as a component of income tax expense. As of December 31, 2024, no such expenses were
recognized during the year. We do not believe there will be any material changes in our uncertain tax positions over the next 12 months.
Accounting for uncertainty in income taxes requires financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s
financial statements. Under this guidance, income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the
adoption of the standard. We did not have any unrecognized tax benefits and there was no effect on our financial condition or results of operations.
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14. SHAREHOLDERS' EQUITY
Preferred Shares
The Company has authorized 250,000 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.
15. 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 purpose of the 2024 Plan was to authorize shares to be available for grant upon
expiration of the 2014 Plan and to make other design changes based on recent corporate governance and other trends. We carried over 472,862 shares that remained
available under the 2014 Plan and our shareholders authorized an additional 27,138 shares for the 2024 Plan for a total of 500,000 shares eligible for grant under the 2024
Plan. As of December 31, 2024, we were authorized to issue 504,267 shares under the 2024 Plan.
During the years ended December 31, 2024 and 2023, and 2022 we issued 19,364 shares, 34,418 shares and 10,762 shares of common stock to members of our Board of
Directors, respectively.
Stock Options
There were no options granted for the year ended December 31, 2024 and 2023. The following table presents the weighted average assumptions used in the option-pricing
model at the grant date for options granted during the year ended December 31:
2022
Assumptions:
Risk-free interest rate
0.82%
Expected dividend yield
2.15%
Expected volatility of Rocky's common stock
54.70%
Expected option term (years)
5.1
Weighted-average grant date fair value per share
$
12.85
For the years ended December 31, 2024 and 2023, we recognized share-based compensation expense and the corresponding tax benefit as follows:
($ in thousands)
2024
2023
2022
Share-based compensation expense
$
1,294 $
1,244 $
1,230
Tax benefit
220
302
221
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The following summarizes stock option activity for the year ended December 31, 2024:
Weighted
Weighted
Average
Average
Remaining
Aggregate
($ amounts are per share)
Shares
Exercise Price
Actual Term
Intrinsic Value
Options outstanding at January 1, 2024
265,086 $
38.92
Issued
-
-
Exercised
(21,700)
27.62
Forfeited or expired
(43,686)
32.59
Options outstanding at December 31, 2024
199,700 $
28.82
10.7 $
256,226
Expected to vest
34,700 $
33.95
14.2 $
-
Exercisable at December 31, 2024
165,000 $
27.74
9.9 $
256,226
For the years ended December 31, 2024, 2023 and 2022, cash received for the exercise of stock options was approximately $0.6 million, $1.0 million, and $0.5 million,
respectively.
Restricted Stock Units
The following table summarizes the status of the Company's restricted stock units and activity as of December 31, 2024:
Restricted Stock Units
Weighted-Average
Grant Date
($ amounts are per share)
Quantity
Fair Value Per Share
Nonvested at January 1, 2024
32,412 $
23.49
Granted
24,680
30.18
Vested
(651)
12.79
Forfeited
(3,018)
26.50
Nonvested at December 31, 2024
53,423 $
26.54
As of December 31, 2024, the total unrecognized compensation cost related to non-vested stock options and restricted stock units was approximately $1.0 million with a
weighted-average expense recognition period of 1.6 years.
16. EARNINGS PER SHARE
Basic earnings per share ("EPS") is computed by dividing net income applicable to common shareholders by the weighted average number of common shares outstanding
during each period. The diluted earnings per share computation includes common share equivalents, when dilutive.
A reconciliation of the shares used in the basic and diluted income per common share computation for the years ended December 31, as follows:
Twelve Months Ended
December 31,
(shares in thousands)
2024
2023
2022
Basic - weighted average shares outstanding
7,437
7,363
7,317
Dilutive restricted share units
23
5
-
Dilutive stock options
20
13
52
Diluted - weighted average shares outstanding
7,480
7,381
7,369
Anti-dilutive securities
120
229
162
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17. REVENUE
Nature of Performance Obligations
Our products are distributed through three distinct channels, which represent our business segments: Wholesale, Retail and Contract Manufacturing. In our Wholesale
business, we distribute our products through a wide range of distribution channels representing over 10,000 retail store locations in the U.S., the U.K. and other international
markets such as Europe. Our Wholesale channels vary by product line and include sporting goods stores, outdoor retailers, independent shoe retailers, hardware stores,
catalogs, mass merchants, uniform stores, farm store chains, specialty safety stores, specialty retailers and online retailers. Our Retail business includes direct sales of our
products to consumers through our business-to-business web platform, e-Commerce websites, third-party marketplaces and our Rocky Outdoor Gear Store. Our Contract
Manufacturing segment includes sales to the U.S. Military, private label sales and any sales to customers in which we are contracted to manufacture or source a specific
footwear product for a customer.
Significant Accounting Policies and Judgements
Revenue is recognized when the performance obligations under the terms of a contract with our customer are satisfied. The performance obligation is satisfied, and revenue
is recorded when control passes to the customer which is generally upon shipment to the customer or at the time of sale for our retail store customers. Revenue is measured
as the amount of consideration we expect to receive in exchange for the transfer of our products, which is the net sales price.
The net sales price includes estimates of variable consideration for which reserves are established. Components of variable consideration include discounts and allowances,
customer rebates, markdowns, and product returns. These reserves are based on the amounts earned, or to be claimed, on the related sales of our products.
Elements of variable consideration including discounts and allowances and rebates are determined at contract inception and are reassessed at each reporting date, at a
minimum, to reflect any change in the types of variable consideration offered to the customer. We determine estimates of variable consideration based on evaluations of
each type of variable consideration and customer contract, historical and anticipated trends, and current economic conditions. Overall, these reserves reflect our best
estimates of the amount of consideration to be earned on the related sales. Actual amounts of consideration ultimately received may differ from our estimates. If actual
results in the future vary from our estimates, we will adjust these estimates, which would affect net revenue and earnings in the period such variances become known.
Our estimated sales returns are based on historical customer return data and known or anticipated returns not yet received from customers. Actual returns in any future
period are inherently uncertain and thus may differ from estimates recorded. If actual or expected future returns are significantly higher or lower than the established
reserves, a reduction or increase to net revenues is recorded in the period in which the determination is made.
Current contract receivables represent contractual minimum payments required under non-cancellable contracts with the U.S. Military and other customers with a duration
of one year or less.
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.
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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.
December 31,
December 31,
($ in thousands)
2024
2023
Contract liabilities
$
- $
927
Significant changes in the contract liabilities balance during the period are as follows:
($ in thousands)
Contract liabilities
Balance, December 31, 2023
927
Non-cancelable contracts with customers entered into during the period
$
-
Revenue recognized related to non-cancelable contracts with customers during the period
(927)
Balance, December 31, 2024
$
-
Disaggregation of Revenue
All revenues are recognized at a point in time when control of our products pass to the customer at point of shipment or point of sale for retail store customers. Because all
revenues are recognized at a point in time and are disaggregated by channel, our segment disclosures are consistent with disaggregation requirements. See Note 19 -
Segment Information for segment disclosures.
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18. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow for the years ended December 31, as follows:
Twelve Months Ended
December 31,
($ in thousands)
2024
2023
2022
Interest paid
$
16,170 $
13,302 $
17,501
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
19. SEGMENT INFORMATION
Reportable Segments - We have identified three reportable segments: Wholesale, Retail and Contract Manufacturing.
Wholesale. In our Wholesale segment, our products are offered in over 10,000 retail locations representing a wide range of distribution channels in the U.S., U.K. and other
international markets, mainly in Europe. These distribution channels vary by product line and target market and include sporting goods stores, outdoor retailers, independent
shoe retailers, hardware stores, catalogs, mass merchants, uniform stores, farm store chains, specialty safety stores, specialty retailers and online retailers.
Retail. In our Retail segment, we market directly to consumers through our Lehigh business-to-business including direct sales and through our CustomFit websites,
consumer e-Commerce websites, third-party marketplaces, and our Rocky Outdoor Gear Store. Through our outdoor gear store, we generally sell first quality or
discontinued products in addition to a limited amount of factory damaged goods, which typically carry lower gross margins.
Contract Manufacturing. In our Contract Manufacturing segment, we include sales to the U.S. Military, private label sales and any sales to customers in which we are
contracted to manufacture or source a specific footwear product for a customer.
Our Chief Operating Decision Maker ("CODM") is our Chief Executive Officer (CEO), who evaluates operating results and performance based on net sales and gross
margin. Our CODM also uses results of net sales and gross margin to evaluate segment performance and allocate resources as the primary metrics for overall segment
evaluation. Operating expenses such as warehousing, distribution, marketing and other key activities supporting our operations are integrated to maximize efficiency and
productivity; therefore, we do not include these expenses within our segment results, but instead review them at the consolidated level.
The following is a summary of segment results for the Wholesale, Retail, and Contract Manufacturing segments for the years ended December 31:
Year Ended
December 31,
($ in thousands)
2024
2023
2022
NET SALES:
Wholesale
$
313,340 $
337,019 $
484,779
Retail
126,868
116,960
115,354
Contract Manufacturing
13,564
7,854
15,342
Total Net Sales
$
453,772 $
461,833 $
615,475
COST OF GOODS SOLD:
Wholesale
$
196,095 $
217,534 $
319,720
Retail
66,715
58,569
57,537
Contract Manufacturing
11,952
7,132
12,999
Total Cost of Goods Sold
$
274,762 $
283,235 $
390,256
GROSS MARGIN:
Wholesale
$
117,245 $
119,485 $
165,059
Retail
60,153
58,391
57,817
Contract Manufacturing
1,612
722
2,343
Total Gross Margin
$
179,010 $
178,598 $
225,219
Segment asset information is not prepared or used to assess segment performance.
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Product Line Information - The following is supplemental information on net sales by product line for the years ended December 31:
($ in thousands)
2024
% of Sales
2023
% of Sales
2022
% of Sales
Work footwear
$
190,349
41.9% $
198,096
42.9% $
256,162
41.6%
Outdoor footwear
130,222
28.7
130,424
28.2
183,121
29.8
Western
82,639
18.2
70,374
15.2
108,697
17.7
Duty and commercial military footwear
34,547
7.6
50,482
10.9
46,177
7.5
Military footwear
11,275
2.5
7,999
1.7
15,342
2.5
Other
4,740
1.0
4,458
1.0
5,976
1.0
$
453,772
100.0% $
461,833
100.0% $
615,475
100.0%
Net sales to foreign countries represented approximately 3.2% of net sales in 2024, 5.1% of net sales in 2023 and 6.2% of net sales in 2022.
The net book value of fixed assets located outside of the U.S. totaled $11.2 million at December 31, 2024 , of which approx imately $3.7 mill ion resides in the Dominican
Republic and approximatel y $7.5 mil lion resides in China.
20. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is involved in legal proceedings in the ordinary course of business. Unless otherwise stated, we believe that the likelihood of the resolution being
materially adverse to our financial statements is remote and as such have not recorded any contingent liabilities within the accompanying Consolidated Financial
Statements.
Gain Contingency
In June 2022, we became aware of a misclassification of Harmonized Tariff Schedule (HTS) codes filed with the U.S. Customs and Border Protection (U.S. Customs) on
certain products imported into the U.S. during 2021 and 2022. As a result of the misclassification of HTS codes we have paid duties in excess of the required amount. We
are in the process of filing multiple post summary corrections with U.S. Customs to seek refunds of duties paid in excess of the correct HTS codes. We have the potential to
recover the total amount of overpaid duties resulting in a potential refund of approximately $7.7 million, of which we have received $5.1 million to date. No refunds were
received for the twelve months ended December 31, 2024, $1.9 million was received during the year ended December 31, 2023 and $3.2 million was received during the
year ended December 31, 2022. We are accounting for these post summary corrections as a gain contingency, and as such have not recorded these potential refunds within
the accompanying consolidated balance sheet due to uncertainty of collection. Refunds received will be recognized as a reduction to the cost of goods sold when, and if, the
refunds are received.
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21. SUBSEQUENT EVENTS
Repurchase of Common Stock
On February 24, 2025, Rocky Brands announced that its Board of Directors has approved a new share repurchase program of up to $7,500,000 of the Company’s
outstanding common stock, no par value per share. This repurchase program replaces the previous repurchase program authorized by the Board of Directors that expired on
March 4, 2022.
Dividends Declared
On February 18, 2025, Rocky Brands announced that its board of directors declared a quarterly cash dividend of $0.155 per share of outstanding common stock, to be paid
on March 17, 2025 to all shareholders of record as of the close of business on March 3, 2025. The declaration and payment of future dividends and the establishment of
future record dates and payment dates are subject to the quarterly determination of the board of directors.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, our management carried out an evaluation, with the participation of our principal executive officer and principal financial
officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934,
as amended). Based upon that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this report. It should be noted that the design of any system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how
remote.
Changes in Internal Control over Financial Reporting
There have been no material changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act)
during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the
Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate. Under the supervision and with the participation of our principal executive officer and principal financial officer, our management conducted
an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) as of December 31, 2024. The scope of management’s assessment of the effectiveness of
internal control over financial reporting includes all of our businesses. Based upon that evaluation under the framework in Internal Control – Integrated Framework (2013),
our management concluded that our internal control over financial reporting was effective as of December 31, 2024. Deloitte & Touche LLP, our independent registered
public accounting firm has issued an attestation report on the effectiveness of our internal controls over financial reporting which is included within this report.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Rocky Brands, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Rocky Brands, Inc. and subsidiaries (the "Company") as of December 31, 2024, based on criteria established
in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—
Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements
as of and for the year ended December 31, 2024, of the Company and our report dated March 17, 2025 expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Columbus, Ohio
March 17, 2025
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ITEM 9B. OTHER INFORMATION.
Trading Plans
During the three months ended December 31, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a
“Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this item is included under the captions "ELECTION OF DIRECTORS," "INFORMATION CONCERNING THE BOARD OF DIRECTORS
AND CORPORATE GOVERNANCE," "INFORMATION CONCERNING EXECUTIVE OFFICERS" and "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE" in the Company's Proxy Statement for the 2025 Annual Meeting of Shareholders (the "Company's Proxy Statement") to be held on June 3, 2025, to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is included under the captions "EXECUTIVE COMPENSATION" and "REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS" and "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" in the Company's Proxy Statement, and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS.
The information required by this item is included under the caption "PRINCIPAL HOLDERS OF VOTING SECURITIES - OWNERSHIP OF COMMON STOCK BY
MANAGEMENT," "- OWNERSHIP OF COMMON STOCK BY PRINCIPAL SHAREHOLDERS," and "EQUITY COMPENSATION PLAN INFORMATION," in the
Company's Proxy Statement, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
The information required by this item is included under the caption "INFORMATION CONCERNING THE BOARD OF DIRECTORS AND CORPORATE
GOVERNANCE" and "TRANSACTIONS WITH RELATED PERSONS" in the Company's Proxy Statement, and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this item is included under the caption "FEES OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" in the Company’s
Proxy Statement, and is incorporated herein by reference.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(1) The following Financial Statements are included in this Annual Report on Form 10-K in Item 8:
● Report of Independent Registered Public Accounting Firm
● Consolidated Balance Sheets as of December 31, 2024 and 2023
● Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022
● Consolidated Statements of Shareholders' Equity for the years ended December 31, 2024, 2023 and 2022
● Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022
● Notes to Consolidated Financial Statements
(2) Exhibits:
Exhibit
Number
Description
3.1
Second Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2006).
3.2
Amendment to Second Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.2 to the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2006).
3.3 (P)
Amended and Restated Code of Regulations of the Company (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1,
registration number 33-56118 (the "Registration Statement")).
4.1 (P)
Form of Stock Certificate for the Company (incorporated by reference to Exhibit 4.1 to the Registration Statement).
4.2
Articles Fourth, Fifth, Sixth, Seventh, Eighth, Eleventh, Twelfth, and Thirteenth of the Company's Second Amended and Restated Articles of
Incorporation (see Exhibit 3.1).
4.3 (P)
Articles I and II of the Company's Code of Regulations (see Exhibit 3.3).
4.4
Description of Common Stock (incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2020).
10.01
Form of Indemnification Agreement entered into between the Company and its directors and executive officers. (incorporated by reference to Exhibit
10.01 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018)
10.02
Schedule of directors and executive officers who have entered into the form of Indemnification Agreement. (incorporated by reference to Exhibit 10.02
to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023)
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10.03
Amended and Restated Lease Agreement, dated March 1, 2002, between Rocky Shoes & Boots Co. and William Brooks Real Estate Company regarding
the Nelsonville factory (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002).
10.04
Lease Contract dated December 16, 1999, between Lifestyle Footwear, Inc. and The Puerto Rico Industrial Development Company (incorporated by
reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
10.05
Amended and Restated 2014 Omnibus Incentive Plan (incorporated by reference to the Company’s Definitive Proxy Statement for the 2021 Annual
Meeting of Shareholders, held on May 26, 2021, filed on April 21, 2021).
10.06
Renewal of Lease Contract, dated June 24, 2004, between Five Star Enterprises Ltd. and the Dominican Republic Corporation for Industrial Development
(incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
10.07
Second Amendment to Lease Agreement, dated as of July 26, 2004, between Rocky Shoes & Boots, Inc. and the William Brooks Real Estate Company
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).
10.08*
Form of Option Award Agreement under the 2024 Omnibus Incentive Plan
10.09*
Form of Restricted Stock Unit Award Agreement under the 2024 Omnibus Incentive Plan
10.10*
Form of Performance Stock Unit Award under the 2024 Omnibus Incentive Plan
10.11
Employment Agreement, dated January 1, 2019, by and between the Company and Jason Brooks (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K dated December 31, 2018, filed January 7, 2019).
10.12
Employment Agreement, dated January 1, 2019, by and between the Company and Thomas Robertson (incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K dated December 31, 2018, filed January 7, 2019).
10.13
Employment Agreement, dated January 1, 2019, by and between the Company and Byron Wortham (incorporated by reference to Exhibit 10.5 to the
Company’s Current Report on Form 8-K dated December 31, 2018, filed January 7, 2019).
10.14
Amended and Restated ABL Loan and Security Agreement, dated April 26, 2024, between the Company and Bank of America, N.A. as Agent, Sole
Arranger and Sole Bookrunner and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-
K dated April 26, 2024 and filed April 30, 2024).
10.15
Rocky Brands, Inc. 2024 Omnibus Incentive Plan (incorporated by reference to Exhibit A to the Company's 2024 Proxy Statement filed April 29, 2024).
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16.1
Letter of Schneider Downs & Co., Inc. to the SEC dated January 10, 2024 (incorporated by reference to Exhibit 16.1 to the Company’s Current Report on
Form 8-K filed on January 12, 2024).
19*
Rocky Brands, Inc. Securities Law Compliance Program
21*
Subsidiaries of the Company.
23.1*
Independent Registered Public Accounting Firm’s Consent of Deloitte & Touche LLP
23.2
Independent Registered Public Accounting Firm’s Consent of Schneider Downs & Co., Inc.
24*
Power of Attorney.
31.1*
Rule 13a-14(a) Certification of Principal Executive Officer.
31.2*
Rule 13a-14(a) Certification of Principal Financial Officer.
32**
Section 1350 Certification of Principal Executive Officer/Principal Financial Officer.
97
Rocky Brands, Inc. Clawback Policy
101*
Attached as Exhibits 101 to this report are the following financial statements from the Company’s Annual Report on Form 10-K for the year ended
December 31, 2024 formatted in Inline eXtensible iXBRL ("eXtensible Business Reporting Language"): (i) the Consolidated Balance Sheets, (ii) the
Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (vi) related notes to these financial statements.
104*
Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101
* Filed with this Annual Report on Form 10-K.
** Furnished with this Annual Report on Form 10-K.
(P) Paper Filing.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ROCKY BRANDS, INC.
Date: March 17, 2025
By:
/s/ JASON BROOKS
Jason Brooks, Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in
the capacities indicated on the dates indicated.
Signature
Title
Date
/s/ JASON S. BROOKS
Chairman, President and Chief Executive Officer
March 17, 2025
Jason S. Brooks
(Principal Executive Officer)
/s/ THOMAS D. ROBERTSON
Chief Financial Officer, Chief Operating Officer and Treasurer
March 17, 2025
Thomas D. Robertson
(Principal Financial and Accounting Officer)
* CURTIS A. LOVELAND
Assistant Secretary and Director
March 17, 2025
Curtis A. Loveland
* MICHAEL L. FINN
Director
March 17, 2025
Michael L. Finn
*ROBYN R. HAHN
Director
March 17, 2025
Robyn R. Hahn
* G. COURTNEY HANING
Lead Director
March 17, 2025
G. Courtney Haning
* WILLIAM L. JORDAN
Director
March 17, 2025
William L. Jordan
* ROBERT B. MOORE, JR.
Director
March 17, 2025
Robert B. Moore, Jr.
* DWIGHT E. SMITH
Director
March 17, 2025
Dwight E. Smith
* TRACIE A. WINBIGLER
Director
March 17, 2025
Tracie A. Winbigler
By: /s/ JASON BROOKS
Jason Brooks, Attorney-in-Fact
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59
Exhibit 10.8
No. 24-PSU-20__-__
Rocky Brands, Inc.
PSU Agreement
This PSU Agreement (this “Agreement”) is made and entered into as of ____________ (the “Grant Date”) by and between Rocky Brands, Inc., an Ohio corporation
(the “Company”) and _______________ (the “Grantee”).
WHEREAS, the Company has adopted the 2024 Omnibus Incentive Plan (the “Plan”) pursuant to which PSUs may be granted; and
WHEREAS, the Committee has determined that it is in the best interests of the Company and its shareholders to grant the award of PSUs provided for herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows:
1. Grant of Performance Share Units. Pursuant to Article X of the Plan, the Company hereby grants to the Grantee an Award for a maximum of _____ Performance Share
Units (the “PSUs”) represents the right to receive one share of Common Stock, subject to the terms and conditions set forth in this Agreement and the Plan. The number of
PSUs that the Grantee actually earns for the Performance Period (up to a maximum of _____ will be determined by the level of achievement of the Performance Goal(s) in
accordance with Exhibit 1 attached hereto. Capitalized terms that are used but not defined herein have the meanings ascribed to them in the Plan.
2. Performance Period. For purposes of this Agreement, the term “Performance Period” shall be the period commencing on _______________ and ending on
_______________.
3. Performance Goal(s).
3.1 The number of PSUs earned by the Grantee for the Performance Period will be determined at the end of the Performance Period based on the level of achievement
of the Performance Goal(s) in accordance with Exhibit 1. All determinations of whether Performance Goals have been achieved, the number of PSUs earned by the Grantee,
and all other matters related to this Section 3 shall be made by the Committee in its sole discretion.
3.2 Promptly following completion of the Performance Period, the Committee will review and certify in writing (a) whether, and to what extent, the Performance
Goal(s) for the Performance Period has/have been achieved, and (b) the number of PSUs that the Grantee shall earn, if any, subject to compliance with the requirements of
Section 4. Such certification shall be final, conclusive and binding on the Grantee, and on all other persons, to the maximum extent permitted by law.
4. Vesting of Performance Share Units. The PSUs are subject to forfeiture until they vest. Except as otherwise provided herein, the PSUs will vest and become
nonforfeitable on the date the Committee certifies the achievement of the Performance Goal(s) in accordance with Section 3.2, subject to (a) the achievement of the
minimum threshold Performance Goal(s) for payout set forth in Exhibit I attached hereto, and (b) unless otherwise determined by the Committee in its sole discretion, the
Grantee’s Continuous Service from the Grant Date through the last day of the Performance Period. The number of PSUs that vest and become payable under this Agreement
shall be determined by the Committee based on the level of achievement of the Performance Goal(s) set forth in Exhibit I and shall be rounded to the nearest whole PSU.
5. Termination of Continuous Service. Except as otherwise expressly provided in this Agreement, and unless otherwise determined in the Committee’s sole discretion, if
the Grantee’s Continuous Service terminates for any reason at any time before all of his or her PSUs have vested, the Grantee’s unvested PSUs shall be automatically
forfeited upon such termination of Continuous Service and neither the Company nor any Affiliate shall have any further obligations to the Grantee under this Agreement.
6. Payment of Performance Share Units. Payment in respect of the PSUs earned for the Performance Period shall be made in shares of Common Stock and shall be issued
to the Grantee as soon as practicable following the vesting date. The Company shall (a) issue and deliver to the Grantee the number of shares of Common Stock equal to the
number of vested PSUs, and (b) enter the Grantee’s name on the books of the Company as the shareholder of record with respect to the shares of Common Stock delivered
to the Grantee.
7. Transferability. Subject to any exceptions set forth in this Agreement or the Plan, the PSUs or the rights relating thereto may not be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by the Grantee, except by will or the laws of descent and distribution, and upon any such transfer by will or the laws
of descent and distribution, the transferee shall hold such PSUs subject to all of the terms and conditions that were applicable to the Grantee immediately prior to such
transfer.
8. Rights as Shareholder.
8.1 The Grantee shall not have any rights of a shareholder with respect to the shares of Common Stock underlying the PSUs, including, but not limited to, voting
rights.
8.2 Upon and following the vesting of the PSUs and the issuance of shares, the Grantee shall be the record owner of the shares of Common Stock underlying the
PSUs unless and until such shares are sold or otherwise disposed of, and as record owner shall be entitled to all rights of a shareholder of the Company (including voting
and dividend rights).
2
9. No Right to Continued Service. Neither the Plan nor this Agreement shall confer upon the Grantee any right to be retained in any position, as an Employee, Consultant
or Director of the Company. Further, nothing in the Plan or this Agreement shall be construed to limit the discretion of the Company to terminate the Grantee’s Continuous
Service at any time, with or without Cause.
10. Adjustments. If any change is made to the outstanding Common Stock or the capital structure of the Company, if required, the PSUs shall be adjusted or terminated in
any manner as contemplated by Section 4.4 of the Plan.
11. Tax Liability and Withholding.
11.1 The Grantee shall be required to pay to the Company, and the Company shall have the right to deduct from any compensation paid to the Grantee pursuant to the
Plan, the amount of any required withholding taxes in respect of the PSUs and to take all such other action as the Committee deems necessary to satisfy all obligations for
the payment of such withholding taxes. The Committee may permit the Grantee to satisfy any federal, state or local tax withholding obligation by any of the following
means, or by a combination of such means:
(a) tendering a cash payment;
(b) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable or deliverable to the Grantee as a
result of the vesting of the PSUs; provided, however, that no shares of Common Stock shall be withheld with a value exceeding the minimum amount of tax required to be
withheld by law; or
(c) delivering to the Company previously owned and unencumbered shares of Common Stock.
11.2 Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-
Related Items”), the ultimate liability for all Tax-Related Items is and remains the Grantee’s responsibility and the Company (a) makes no representation or undertakings
regarding the treatment of any Tax-Related Items in connection with the grant, vesting or settlement of the PSUs or the subsequent sale of any shares, and (b) does not
commit to structure the PSUs to reduce or eliminate the Grantee’s liability for Tax-Related Items.
12. Forfeiture Conditions. Notwithstanding the foregoing, in the event of termination of Service for Cause, (i) any unvested Restricted Stock Units shall be forfeited
immediately, and (ii) if shares of Common Stock have been delivered to the Grantee in settlement of Vested Units, then the shares of Common Stock so issued shall be
forfeited and returned to the Company.
3
13. Compliance with Law. The issuance and transfer of shares of Common Stock in connection with the PSUs shall be subject to compliance by the Company and the
Grantee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s shares of
Common Stock may be listed. No shares of Common Stock shall be issued or transferred unless and until any then applicable requirements of state and federal laws and
regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel.
14. Notices. Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to the Chief Financial Officer of the Company at
the Company’s principal corporate offices. Any notice required to be delivered to the Grantee under this Agreement shall be in writing and addressed to the Grantee at the
Grantee’s address as shown in the records of the Company. Either party may designate another address in writing (or by such other method approved by the Company) from
time to time.
15. Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Ohio without regard to conflict of law principles.
16. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Grantee or the Company to the Committee for review. The
resolution of such dispute by the Committee shall be final and binding on the Grantee and the Company.
17. Performance Share Units Subject to Plan. This Agreement is subject to the Plan as approved by the Company’s shareholders. The terms and provisions of the Plan as it
may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or
provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
18. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the
successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Grantee and the Grantee’s
beneficiaries, executors, administrators and the person(s) to whom the PSUs may be transferred by will or the laws of descent or distribution.
19. Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of
the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.
20. Discretionary Nature of Plan. The Plan is discretionary and may be amended, cancelled or terminated by the Company at any time, in its discretion. The grant of the
PSUs in this Agreement does not create any contractual right or other right to receive any PSUs or other Awards in the future. Future Awards, if any, will be at the sole
discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the
Grantee’s employment with the Company.
4
21. Amendment. The Committee has the right to amend, alter, suspend, discontinue or cancel the PSUs, prospectively or retroactively; provided, that, no such amendment
shall adversely affect the Grantee’s material rights under this Agreement without the Grantee’s consent.
22. Section 409A. This Agreement is intended to comply with Section 409A of the Code or an exemption thereunder and shall be construed and interpreted in a manner
that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no
representations that the payments and benefits provided under this Agreement comply with Section 409A of the Code and in no event shall the Company be liable for all or
any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with Section 409A of the Code.
23. No Impact on Other Benefits. The value of the Grantee’s PSUs is not part of his or her normal or expected compensation for purposes of calculating any severance,
retirement, welfare, insurance or similar employee benefit.
24. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same
instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other
electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document
bearing an original signature.
25. Acceptance. The Grantee hereby acknowledges receipt of a copy of the Plan and this Agreement. The Grantee has read and understands the terms and provisions
thereof, and accepts the PSUs subject to all of the terms and conditions of the Plan and this Agreement. The Grantee acknowledges that there may be adverse tax
consequences upon the vesting or settlement of the PSUs or disposition of the underlying shares and that the Grantee has been advised to consult a tax advisor prior to such
vesting, settlement or disposition.
[SIGNATURE PAGE FOLLOWS]
5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
ROCKY BRANDS, INC.
[Name, Title]
GRANTEE
[Grantee Name]
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EXHIBIT 1
7
Exhibit 10.9
No. 24-RSU-20__-__
Rocky Brands, Inc.
Restricted Stock Unit Agreement
This Restricted Stock Unit Agreement (this “Agreement”) is made and entered into as of _______________ (the “Grant Date”) by and between Rocky Brands, Inc.,
an Ohio corporation (the “Company”) and ______________ (the “Grantee”).
WHEREAS, the Company has adopted the 2024 Omnibus Incentive Plan (the “Plan”) pursuant to which awards of Restricted Stock Units may be granted; and
WHEREAS, the Committee has determined that it is in the best interests of the Company and its shareholders to grant the award of Restricted Stock Units provided for
herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows:
1. Grant of Restricted Stock Units.
1.1 Pursuant to Article VIII of the Plan, the Company hereby issues to the Grantee on the Grant Date an Award consisting of, in the aggregate, ______ Restricted
Stock Units (the “RSUs”). Each RSU represents the right to receive one share of Common Stock, subject to the terms and conditions set forth in this Agreement and the
Plan. Capitalized terms that are used but not defined herein have the meaning ascribed to them in the Plan.
1.2 The RSUs shall be credited to a separate account maintained for the Grantee on the books and records of the Company (the “Account”). All amounts credited to
the Account shall continue for all purposes to be part of the general assets of the Company.
2. Consideration. The grant of the RSUs is made in consideration of the services to be rendered by the Grantee to the Company.
3. Vesting.
3.1 Except as otherwise provided herein, provided that the Grantee remains in Continuous Service through the applicable vesting date, the RSUs will vest in
accordance with the following schedule (the period during which restrictions apply, the “Restricted Period”):
Vesting Date
Total Percentage of Restricted Stock Units
[Date]
25%
[Date]
50%
[Date]
75%
[Date]
100%
Once vested, the RSUs become “Vested Units.”
3.2 The foregoing vesting schedule notwithstanding, and unless determined otherwise in the Committee’s sole discretion, if the Grantee’s Service terminates for any
reason at any time before all of his or her RSUs have vested, the Grantee’s unvested RSUs shall be automatically forfeited upon such termination of Service and neither the
Company nor any Affiliate shall have any further obligations to the Grantee under this Agreement.
4. Restrictions. Subject to any exceptions set forth in this Agreement or the Plan, during the Restricted Period and until such time as the RSUs are settled in accordance
with Section 6, the RSUs or the rights relating thereto may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Grantee. Any
attempt to assign, alienate, pledge, attach, sell or otherwise transfer or encumber the RSUs or the rights relating thereto shall be wholly ineffective and, if any such attempt
is made, the RSUs will be forfeited by the Grantee and all of the Grantee’s rights to such units shall immediately terminate without any payment or consideration by the
Company.
5. Rights as Shareholder.
5.1 The Grantee shall not have any rights of a shareholder with respect to the shares of Common Stock underlying the RSUs unless and until the RSUs vest and are
settled by the issuance of such shares of Common Stock.
5.2 Upon and following the settlement of the RSUs, the Grantee shall be the record owner of the shares of Common Stock underlying the RSUs unless and until such
shares are sold or otherwise disposed of, and as record owner shall be entitled to all rights of a shareholder of the Company (including voting rights).
6. Settlement of Restricted Stock Units.
6.1 Subject to Section 9 hereof, promptly following the vesting date, issue and deliver to the Grantee the number of shares of Common Stock equal to the number of
Vested Units.
6.2 If the Grantee is deemed a “specified employee” within the meaning of Section 409A of the Code, as determined by the Committee, at a time when the Grantee
becomes eligible for settlement of the RSUs upon his “separation from service” within the meaning of Section 409A of the Code, then to the extent necessary to prevent any
accelerated or additional tax under Section 409A of the Code, such settlement will be delayed until the earlier of: (a) the date that is six months following the Grantee’s
separation from service and (b) the Grantee’s death.
2
7. No Right to Continued Service. Neither the Plan nor this Agreement shall confer upon the Grantee any right to be retained in any position, as an Employee, Consultant
or Director of the Company. Further, nothing in the Plan or this Agreement shall be construed to limit the discretion of the Company to terminate the Grantee’s Service at
any time, with or without Cause.
8. Adjustments. If any change is made to the outstanding Common Stock or the capital structure of the Company, if required, the RSUs shall be adjusted or terminated in
any manner as contemplated by Section 4.4 of the Plan.
9. Tax Liability and Withholding.
9.1 The Grantee shall be required to pay to the Company, and the Company shall have the right to deduct from any compensation paid to the Grantee pursuant to the
Plan, the amount of any required withholding taxes in respect of the RSUs and to take all such other action as the Committee deems necessary to satisfy all obligations for
the payment of such withholding taxes. The Committee may permit the Grantee to satisfy any federal, state or local tax withholding obligation by any of the following
means, or by a combination of such means:
(a) tendering a cash payment.
(b) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable or deliverable to the Grantee as a
result of the vesting of the RSUs; provided, however, that no shares of Common Stock shall be withheld with a value exceeding the minimum amount of tax required to be
withheld by law.
(c) delivering to the Company previously owned and unencumbered shares of Common Stock.
9.2 Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-Related
Items”), the ultimate liability for all Tax-Related Items is and remains the Grantee’s responsibility and the Company (a) makes no representation or undertakings regarding
the treatment of any Tax-Related Items in connection with the grant, vesting or settlement of the RSUs or the subsequent sale of any shares; and (b) does not commit to
structure the RSUs to reduce or eliminate the Grantee’s liability for Tax-Related Items.
10. Forfeiture Conditions. Notwithstanding the foregoing, in the event of termination of Service for Cause, (i) any unvested Restricted Stock Units shall be forfeited
immediately, and (ii) if shares of Common Stock have been delivered to the Grantee in settlement of Vested Units, then the shares of Common Stock so issued shall be
forfeited and returned to the Company.
11. Compliance with Law. The issuance and transfer of shares of Common Stock shall be subject to compliance by the Company and the Grantee with all applicable
requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s shares of Common Stock may be
listed. No shares of Common Stock shall be issued or transferred unless and until any then applicable requirements of state and federal laws and regulatory agencies have
been fully complied with to the satisfaction of the Company and its counsel.
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12. Notices. Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to the Chief Financial Officer of the Company at
the Company’s principal corporate offices. Any notice required to be delivered to the Grantee under this Agreement shall be in writing and addressed to the Grantee at the
Grantee’s address as shown in the records of the Company. Either party may designate another address in writing (or by such other method approved by the Company) from
time to time.
13. Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Ohio without regard to conflict of law principles.
14. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Grantee or the Company to the Committee for review. The
resolution of such dispute by the Committee shall be final and binding on the Grantee and the Company.
15. Restricted Stock Units Subject to Plan. This Agreement is subject to the Plan as approved by the Company’s shareholders. The terms and provisions of the Plan as it
may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or
provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
16. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the
successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Grantee and the Grantee’s
beneficiaries, executors, administrators and the person(s) to whom the RSUs may be transferred by will or the laws of descent or distribution.
17. Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of
the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.
18. Discretionary Nature of Plan. The Plan is discretionary and may be amended, cancelled or terminated by the Company at any time, in its discretion. The grant of the
RSUs in this Agreement does not create any contractual right or other right to receive any RSUs or other Awards in the future. Future Awards, if any, will be at the sole
discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the
Grantee’s employment with the Company.
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19. Amendment. The Committee has the right to amend, alter, suspend, discontinue or cancel the RSUs, prospectively or retroactively; provided, that, no such amendment
shall adversely affect the Grantee’s material rights under this Agreement without the Grantee’s consent.
20. Section 409A. This Agreement is intended to comply with Section 409A of the Code or an exemption thereunder and shall be construed and interpreted in a manner
that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no
representations that the payments and benefits provided under this Agreement comply with Section 409A of the Code and in no event shall the Company be liable for all or
any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with Section 409A of the Code.
21. No Impact on Other Benefits. The value of the Grantee’s RSUs is not part of his or her normal or expected compensation for purposes of calculating any severance,
retirement, welfare, insurance or similar employee benefit.
22. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same
instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other
electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document
bearing an original signature.
23. Acceptance. The Grantee hereby acknowledges receipt of a copy of the Plan and this Agreement. The Grantee has read and understands the terms and provisions
thereof, and accepts the RSUs subject to all of the terms and conditions of the Plan and this Agreement. The Grantee acknowledges that there may be adverse tax
consequences upon the vesting or settlement of the RSUs or disposition of the underlying shares and that the Grantee has been advised to consult a tax advisor prior to such
vesting, settlement or disposition.
[SIGNATURE PAGE FOLLOWS]
5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
ROCKY BRANDS, INC.
[Name, Title]
GRANTEE
[Grantee Name]
6
Exhibit 10.10
No. 24-ISO-20__-__
ROCKY BRANDS, INC.
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE
2024 OMNIBUS INCENTIVE PLAN
Rocky Brands, Inc. (the “Company”) hereby grants, effective this ___ day of ______, ____ (the “Effective Date”) to _______________ (the “Optionee”) an Option
to purchase _____ shares of its common stock, without par value (the “Option Shares”), at a price of $_____ per share pursuant to the Company’s 2014 Omnibus Incentive
Plan (the “Plan”), subject to the following:
1. RELATIONSHIP TO THE PLAN. This Option is granted pursuant to the Plan, and is in all respects subject to the terms, provisions and definitions of the
Plan and any amendments thereto. The Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and conditions thereof.
The Optionee accepts this Option subject to all the terms and provisions of the Plan (including without limitation provisions relating to non-transferability, exercise of the
Option, sale of the Option shares, termination of the Option, adjustment of the number of shares subject to the Option, and the exercise price of the Option). The Optionee
further agrees that all decisions and interpretations made by the Stock Option Committee (the “Committee”), as established under the Plan, and as from time to time
constituted, are final, binding, and conclusive upon the Optionee and his or her heirs. This Option is an Incentive Stock Option under the Plan.
2. TIME OF EXERCISE. This Option may be exercised, from time to time, in full or in part, by the Optionee to the extent the Option is vested based upon
the number of full years the Optionee is an employee of the Company after the Effective Date (the “Vested Percentage”) and shall remain exercisable (subject to the
provisions herein and the Plan) until it has been exercised as to all of the Shares or __________, 20__, whichever occurs first. The Optionee shall be entitled to exercise this
Option to the extent of the percentage of, and not to exceed in the aggregate, the maximum number of the Shares, based upon the Vested Percentage, from time to time,
which shall be determined in accordance with the following schedule:
Effective Date
Vested Percentage
[Date]
20%
[Date]
40%
[Date]
60%
[Date]
80%
[Date]
100%
Notwithstanding the foregoing, this Option may not be exercised unless (i) the Option Shares are registered under the Securities Act of 1933, as amended, and are
registered or qualified under applicable state securities or “blue sky” laws, or (ii) the Company has received an opinion of counsel to the Company to the effect that the
Option may be exercised and Option Shares may be issued by the Company pursuant thereto without such registration or qualification. If this Option is not otherwise
exercisable by reason of the foregoing sentence, the Company will take reasonable steps to comply with applicable state and federal securities laws in connection with such
issuance.
3. METHODS OF EXERCISE. This Option is exercisable by delivery to the Company of written notice of exercise which specifies the number of shares to
be purchased and the election of the method of payment therefor, which will be one of the methods of payment specified in Section 6.4 of the Plan. If payment is otherwise
than payment in full in cash, the method of payment is subject to the consent of the Committee. Upon receipt of payment for the shares to be purchased pursuant to the
Option or, if applicable, the shares to be delivered pursuant to the election of an alternative payment method, the Company will deliver or cause to be delivered to the
Optionee, to any other person exercising this Option, or to a broker or dealer if the method of payment specified in clause (ii) of Section 6.4 of the Plan is elected, a
certificate or certificates for the number of shares with respect to which this Option is being exercised, registered in the name of the Optionee or other person exercising the
Option, or if appropriate, in the name of such broker or dealer; provided, however, that if any law or regulation or order of the Securities and Exchange Commission or other
body having jurisdiction over the exercise of this Option will require the Company or Optionee (or other person exercising this Option) to take any action in connection
with the shares then being purchased, the delivery of the certificate or certificates for such shares may be delayed for the period necessary to take and complete such action.
4. ACQUISITION FOR INVESTMENT. This Option is granted on the condition that the acquisition of the Option Shares hereunder will be for the account
of the Optionee (or other person exercising this Option) for investment purposes and not with a view to resale or distribution, except that such condition will be inoperative
if the Option Shares are registered under the Securities Act of 1933, as amended, or if in the opinion of counsel for the Company such shares may be resold without
registration. At the time of any exercise of the Option, the Optionee (or other person exercising this Option) will execute such further agreements as the Company may
require to implement the foregoing condition and to acknowledge the Optionee’s (or such other person’s) familiarity with restrictions on the resale of the Option Shares
under applicable securities laws.
5. DISPOSITION OF SHARES. The Optionee or any other person who may exercise this Option will notify the Company within seven (7) days of any sale
or other transfer of any Option Shares, and the Company may place a legend on the Option Shares to such effect. If any class of equity securities of the Company is
registered pursuant to section 12 of the Securities Exchange Act of 1934, as amended, and the Optionee or any other person who may exercise this Option is subject to
section 16 of that Act by virtue of such Optionee’s or person’s relationship to the Company, the Optionee or other person exercising this Option agrees not to sell or
otherwise dispose of any Option Shares unless at least six (6) months have elapsed from the Effective Date.
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6. WITHHOLDING. As a condition to the issuance of any of the Shares under this Option, Optionee or any person who may exercise this Option authorizes
the Company to withhold in accordance with applicable law from any salary, wages or other compensation for services payable by the Company to or with respect to
Optionee any and all taxes required to be withheld by the Company under federal, state or local law as a result of such Optionee’s or such person’s receipt or disposition of
Shares purchased under this Option. If, for any reason, the Company is unable to withhold all or any portion of the amount required to be withheld, Optionee (or any person
who may exercise this Option) agrees to pay to the Company upon exercise of this Option an amount equal to the withholding required to be made less the amount actually
withheld by the Company.
7. FORFEITURE. If Optionee’s Service is terminated for Cause, this Option (whether vested or unvested) shall immediately terminate and cease to be
exercisable. If shares have been delivered to the Optionee upon exercise of this Option, then the shares so issued shall be forfeited and returned to the Company.
8. GENERAL. This Agreement will be construed as a contract under the laws of the State of Ohio without reference to Ohio’s choice of law rules. It may be
executed in several counterparts, all of which will constitute one Agreement. It will bind and, subject to the terms of the Plan, benefit the parties and their respective
successors, assigns, and legal representatives.
IN WITNESS WHEREOF, the Company and the Optionee have executed this Agreement as of the date first above written.
OPTIONEE:
ROCKY BRANDS, INC.
[Optionee Name]
[Name, Title]
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Exhibit 19
Rocky Brands, Inc.
SECURITIES LAW COMPLIANCE PROGRAM
Rocky Brands, Inc. (together with its subsidiaries, the “Company”) is committed to promoting honest and ethical business conduct and compliance with laws, rules
and regulations. As part of this commitment, our Board of Directors has adopted this Securities Law Compliance Program. The Board of Directors believes that a strong
compliance program is an important aspect of responsible corporate management, as even inadvertent violations of federal securities laws by a corporation or its employees
can result in civil or criminal penalties, fines, and adverse publicity and can require substantial commitments of time and resources to address or rectify.
One purpose of this Securities Law Compliance Program is to educate and inform all employees of their obligations under the securities laws as employees of a
public company. It is designed to educate employees to recognize and understand the ethical, business, and legal reasons for not engaging in insider trading. It also explicitly
prohibits employees from divulging confidential or non‑public information about our Company or any company with which it does business and from trading in our
common stock or the securities of any such company while the employee is in possession of material, non‑public information.
I.
Scope of Policy - Limitations Applicable to All Directors, Officers, Employees and Immediate Family Members.
A.
Rule Against Trading on Inside Information.
●
It is a violation of federal securities laws for any Covered Person to buy or sell our securities if such Covered Person is in possession of material non-
public information.
●
It is also illegal for any Covered Person in possession of material non-public information about our Company to provide other people with such
information for their use or to recommend that they buy or sell our securities.
●
It is also illegal for any Covered Person to buy or sell, or to recommend that another person buy or sell, the securities of another company, if such
Covered Person learns in the course of his or her employment material non-public information about that company.
Federal securities laws regulate the sale and purchase of securities in the interest of protecting the investing public, and place the responsibility on the Company
and Covered Persons to ensure that information about our Company is not used unlawfully in the purchase and sale of securities.
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Covered Persons. This policy covers all employees, officers and members of the Board of Directors of the Company, as well as the immediate family members
residing with such persons or any other person in such person’s household, or any other family members whose transactions in the Company’s securities are directed by or
subject to the influence or control of such employee, officer or member of the Board of Directors of the Company (each, a “Covered Person”). Covered Persons are
responsible for ensuring compliance with this policy by members of their immediate family members and other persons sharing their households, and by entities with which
they are affiliated or associated.
The Purpose of the Policy Against Trading While in Possession of Material Non-Public Information. A Covered Person should pay particularly close attention to
the laws against trading on material non-public or “inside” information. These laws are based upon the belief that all persons trading in a company’s securities should have
equal access to all “material” information about that company. For example, if a Covered Person knows material non-public financial information, that Covered Person is
prohibited from buying or selling securities in the company until the information has been disclosed to the public. This is because the Covered Person knows confidential or
private information that will probably cause the securities price to change once such information is made public, and it would be unfair for the Covered Person to have an
advantage (knowledge that the securities price will change) that the rest of the investing public does not have.
Inside information does not belong to the Covered Person who may handle such information or otherwise become knowledgeable about it. For any such person to
use such information for personal benefit or to disclose it to others outside our Company violates our interests and, in connection with trading in our securities, is viewed as
a fraud against the investing public. Severe penalties may be imposed for violations of the insider trading laws.
What Information is Material Non-Public Information? Information about securities is “material” if it could affect a person’s decision whether to buy, sell, or hold
the securities. For example, it would be material for a person to know what a company’s sales or financial results are before they have been released, that an important
acquisition or sale is about to occur, or that the company is about to introduce a major new business initiative. Such information is “non-public” information if it has not
been broadly disseminated to the market at large. “Non-public” information may also include undisclosed information that is the subject of rumors, even if the rumors are
widely circulated. Generally, information is broadly disseminated when a company discloses it to the market through the media of widest relevant circulation, e.g., press
releases and SEC filings, and the public has had reasonable opportunity to evaluate the impact of the information on the stock of the company. If you are unsure whether
information is material non-public information, you should assume that information is material non-public information or consult the Compliance Officers before making
any decision to disclose such information or trade in securities to which that information relates.
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Trading on Material Non-Public Information Concerning Our Company. The prohibition against trading on inside information applies to our directors, officers and
all other employees, and to all other people who gain access to that information. You could be held liable even if you did not profit in any way from the disclosure of such
information to another person. For example, if you disclose material non-public information about our Company to a family member or a friend who uses the information to
sell or purchase our Company’s stock and thereby profits from the “tipped” information, you and the recipient of the information could both be held liable for civil penalties
and could be subjected to severe criminal penalties.
Material Non-Public Information Concerning Other Companies. The same rules apply to the securities of other companies. For example, it would be a violation of
the securities laws if a Covered Person learned through our Company’s sources that we intended to purchase assets from a company, and then bought or sold stock in such
company because of the likely increase or decrease in the value of its securities. A Covered Person who learns material inside information about suppliers, customers, or
competitors through their work at our Company should keep it confidential and not buy or sell stock in such companies until the information becomes public.
Additional Trading Restrictions Applicable to Directors, Officers and Access Group Employees. Because of their access to confidential information on a regular
basis, our policy subjects members of our Board of Directors, our officers and certain other employees (the “Access Group Employees” as described in Schedule 1 to this
Program) to additional restrictions on trading in our securities. These restrictions are generally discussed in Section II below.
SEC Enforcement and Penalties. The Securities and Exchange Commission (the “SEC”) is responsible for monitoring insider trading and enforcing the laws
against such trading. Civil and criminal penalties for this kind of activity are severe. A breach of the insider trading laws could expose a person to criminal fines up to Five
Million Dollars ($5,000,000) and imprisonment up to twenty years, in addition to civil penalties up to three times the profits earned or losses avoided. In addition, punitive
damages may be imposed under applicable state laws. Securities laws may also subject “controlling persons” to civil penalties for illegal insider trading by employees.
Controlling persons may include directors, officers, other employees and the Company itself. The Company may also impose penalties and subject violators of this policy to
disciplinary action, including dismissal for cause.
B.
Rule Against Short Sales and Trading in Put and Call Options.
●
A Covered Person may not engage in short sales or trade in options in our securities.
Our Company also prohibits a Covered Person from engaging in short sales and trading in options, such as tradable put and call options, in our securities.
-3-
Short sales and options trading may be viewed as highly speculative, and people who engage in short sales and buy options are usually betting that the securities’
price will move rapidly. For that reason, when a person engages in short sales or trades in options in his or her employer’s securities, it will arouse suspicion in the eyes of
the SEC that the person was trading on the basis of inside information. If the SEC or the stock exchanges were to notice active short sales or options trading by a Covered
Person prior to an announcement, they would likely investigate. Such an investigation could be damage our brands and reputation, and could result in severe penalties and
significant expenses for the persons involved.
This policy does not pertain to employee stock options granted by us. Employee stock options are personal to the employee and cannot be traded.
C.
Rule Against Margin Accounts.
●
Directors, executive officers, Access Group Employees and their respective family members are not permitted to purchase our securities on margin or
hold our securities in a margin account without the prior consent of our designated Compliance Officers. All other employees are advised to exercise
caution when maintaining margin accounts with our Company’s securities.
Securities held in a margin account may be sold by the broker without the customer’s consent if the customer fails to meet a margin call. Such a sale could occur at
a time when a director, executive officer or Access Group Employee has material inside information or is otherwise not permitted to trade in our securities. Therefore, a
Compliance Officer must give prior consent to the establishment of a margin account in which a director, executive officer or Access Group Employee holds securities in
our Company. For the same reasons, all other employees are advised to exercise caution with respect to any margin account they maintain with securities of our Company.
D.
Rule Against Hedging.
●
A Covered Person may not enter into hedging or monetization transactions or similar arrangements with respect to the Company’s securities.
E.
Trading Windows and General Guidelines.
The following guidelines should be followed in order to ensure compliance with applicable anti-fraud laws and with our policies:
1. Do Not Disclose Material Non-Public Information. Material non-public information must not be disclosed to anyone, except to persons within
our Company whose positions require them to know it. A Covered Person whose job causes them to possess material inside information should treat it carefully to avoid
even inadvertent disclosure.
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2. Trade in our Company’s Stock Only During “Window” Periods. We strongly advise that all employees limit trading in our securities to the
trading windows established by the designated Compliance Officers. Our Company’s Compliance Officers will determine and communicate when the directors, officers
and Access Group Employees may buy or sell Company securities. These periods will generally begin two days after the Company has publicly announced its quarterly
earnings or annual earnings and end as of the beginning of the last month of each fiscal quarter. All employees are advised to limit trading in our securities to these trading
window periods. From time to time, other types of material non-public information regarding the Company may be pending and may not be publicly disclosed. While such
material non-public information is pending, the Company may impose special blackout periods during which directors, officers and Access Group Employees are prohibited
from trading in the Company’s securities. If such a special blackout period is imposed, the Company will notify the affected individuals.
These window periods do not excuse all trades, but merely define the time periods during which the market is likely to be current on all material developments
affecting the Company. You should not trade when in the possession of material non-public information even if the trading window is otherwise “open.”
The exercise of employee stock options is not subject to this guideline. Our Company’s stock that was acquired upon exercise of a stock option, however, will
be treated like any other shares of our stock. Directors, executive officers and Access Group Employees are limited to trading only during the window periods and are
subject to additional restrictions on trading that are set forth in Section II below.
The trading window restrictions do not apply to transactions under a pre-existing written, plan, contract, instruction or arrangement under Rule 10b-5 of the
Securities Exchange Act of 1934 (an “Approved 10b5-1 Plan”), provided that the following requirements are met:
●
such plan has been reviewed and approved by the Compliance Officers at least three (3) days in advance of being entered into (or, if revised and amended,
such proposed revisions or amendments have bene reviewed by the Compliance Officers at least three (3) days in advance of being entered into);
●
such plan provides that no trades may occur until the applicable cooling-off period has expired, and no trades occur until after that time. The appropriate
cooling-off period will vary based on the status of the Covered Person. For directors and officers, the cooling-off period ends on the later of (x) ninety
days after adoption or certain modifications of the Approved 10b5-1 Plan; or (y) two business days following disclosure of the Company’s financial
results in a Form 10-Q or Form 10-K for the quarter in which the Approved 10b5-1 Plan was adopted. For all other Covered Persons, the cooling-off
period ends 30 days after adoption or modification of the Approved 10b5-1 Plan. This required cooling-off period will apply to the entry into a new 10b5-
1 plan and any revision or modification of an Approved 10b5-1 Plan;
-5-
●
such plan is entered into in good faith by the Covered Person, and not as a part of a plan or scheme to evade the prohibitions of Rule 10b5-1, at a time
when the Covered Person in not in possession of material non-public information about the Company. If the Covered Person is a director or officer, the
10b-1 plan must include representations by the Covered Person certifying to that effect;
●
it gives a third party the discretionary authority to execute such purchases and sales, outside the control of the Covered Person, so long as such third party
does not possess any material non-public information about the Company, or explicitly specifies the securities to be purchased or sold, the number of
shares, the prices and/or dates of transactions, or other formulas for describing such transactions; and
●
it is the only outstanding Approved 10b5-1 Plan entered into by the Covered Person (subject to the exceptions set forth in Rule 10b5-1(c)(ii)(D)).
Please contact the Compliance Officers if you are considering entering into, modifying or terminating an Approved 10b5-1 Plan or if you have any questions regarding such
plans.
3. Avoid Speculation. We strongly encourage directors, officers and employees to avoid frequent (speculative) trading in our securities. Investing
in our common stock provides an opportunity to share in our future growth. But investment in our Company and sharing in our growth does not mean short range
speculation based on fluctuations in the market. Such activities put the personal gain of the Covered Person in conflict with the best interests of our Company and our
shareholders.
4. Ask Questions; Seek Counsel. This Program only briefly summarizes the key provisions of some of the federal securities laws affecting you and does
not purport to be a complete summary of all laws relating to the misuse of material non-public information or other securities laws which may be applicable to you. The
federal securities laws are complex, and their application depends in large part on particular facts. You should not rely on casual advice. If you have any questions about
how these rules and laws apply to you, please contact the Compliance Officers of our Company or your own legal counsel.
II.
Special Limitations on Securities Transactions for Directors, Executive Officers and Access Group Employees.
Members of our Board of Directors, executive officers and Access Group Employees are subject to the following restrictions on trading in our Company’s
Securities.
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A.
Pre-Clearance of Securities Transactions.
●
All transactions in our stock, such as sales, purchases, gifts, and other transactions, by directors, executive officers, and Access Group Employees
must be pre-cleared by the Compliance Officers and must be completed only within periods of permitted securities trading, which trading windows
will be established and communicated from time to time by the Compliance Officers.
Directors, executive officers, and Access Group Employees can reasonably be anticipated to have access from time to time to material non-public information. In
order to avoid unintentional violations of the federal securities laws, these persons will be required to clear any transaction (i.e., sales, purchases, or gifts) in our stock with a
Compliance Officer before engaging in the transaction. Pre-clearance is required so that the Compliance Officers will be in a position to aid the individual in determining
whether material non-public information exists, avoiding any short-swing profit recovery and assuring that appropriate Form 4, Form 5 and Form 144 filings are timely
made with the SEC, if required. The Compliance Officers will also have the opportunity to explain our policies to the individual and answer any questions.
When a Compliance Officer knows of a material non-public event involving our Company but the individual desiring to trade does not know of the event, the
Compliance Officer will provide the individual with substantially the following explanation: “Our Company is in a quiet period right now and you cannot buy or sell our
stock. You will be notified as soon as we are no longer in the quiet period and you will be able to trade at that time.”
Pre-clearance is not required for transactions under an Approved 10b5-1 Plan once the applicable cooling-off period has expired. No trades may be made under an
Approved 10b5-1 Plan until expiration of the applicable cooling-off period. The third party effecting the transaction under the Approved 10b5-1 Plan on behalf of the
Covered Person should be instructed to send confirmations of all such transactions to the Compliance Officers.
B.
Section 16 Compliance.
●
Directors and officers designated by our Board of Directors as executive officers subject to Section 16 of the Securities Exchange Act of 1934, as
amended, are “SEC Reporting Persons” and are required to report all transactions in our securities to the SEC.
A power of attorney will be obtained from each SEC Reporting Person granting the Compliance Officers and our counsel the power to sign the necessary forms
and submit the forms to the SEC in the event the SEC Reporting Person is unable to do so.
-7-
Although it is the SEC Reporting Person’s obligation to file the required Section 16(a) reports with the SEC, a Compliance Officer or our counsel will assist the
executive officer in complying with this obligation by preparing the required Forms 3, 4 and 5 based on information that is provided by the SEC Reporting Person. A
Compliance Officer or our counsel will send the report to the SEC Reporting Person to verify the information and execute the form. The Compliance Officer or our counsel
will file the report with the SEC upon receipt.
C.
Short-swing Profits.
●
Directors and officers designated as SEC Reporting Persons may not engage in a purchase or sale transaction within six months of a previous
“matchable” sale or purchase transaction in our Company’s securities, respectively, if such transaction is not an exempt transaction under Section 16
of the Securities Exchange Act of 1934, as amended.
As an SEC Reporting Person, profits on any “matchable” transactions in our Company’s securities within a six month period must be forfeited to our Company.
Such transactions are subject to the rule whether or not the director or officer was aware of any material nonpublic information at any time during the six month period.
Many important transactions are exempt from this rule, such as the exercise of a stock option granted by our Company, which exercise is not deemed a purchase. However,
the subsequent sale of the shares issued upon exercise of the option is subject to the rule. Before you make any transaction in our Company’s securities, determine whether
you have made another transaction that could be matched within six months and consult with the Compliance Officers or legal counsel to ascertain whether a proposed
transaction could violate the short-swing profits rules.
D.
Short Sale Prohibition.
●
It is unlawful for an SEC Reporting Person to engage in a short sale of our Company’s securities.
The securities laws make it unlawful for our directors and executive officers to make short sales of our securities.
III.
Centralized Control of Information Released to the Public through Communications Officers.
Our policy is to release information in a manner to assure its accuracy and broadest possible dissemination consistent with the type and relative importance of the
information and to avoid selective disclosure of information. To implement this policy, the responsibility for contacts with the press, communication with analysts and the
financial community and release of Company information will be centralized in a small number of designated senior officers who will be appointed by our Board of
Directors. It will be the responsibility of these Communications Officers (as set forth in Schedule 2) to keep fully informed of all material developments regarding our
Company and to communicate and coordinate with each other regarding the nature and timing of disclosures. All press releases or public statements by our Company will
be reviewed with and approved by the Communications Officers prior to dissemination. Employees should refer all requests for information about the Company from the
press, analysts, brokers, shareholders or the financial community generally to the Communications Officers.
-8-
IV.
Appointment of Compliance Officers.
Our Board of Directors shall appoint one or more Compliance Officers to implement and oversee this Securities Law Compliance Program. The Compliance
Officers (as set forth in Schedule 3) will be the primary contact for educating and answering questions of employees relating to securities law compliance. These officers are
required to obtain a basic understanding of the securities laws, through a careful review of the Federal Securities Law Compliance Memorandum prepared for our officers
and directors by our corporate counsel. The Compliance Officers will provide reminders to, and otherwise assist, a Covered Person to ensure that they meet all applicable
securities laws obligations. The Compliance Officers will keep current on changes in the securities laws and assist counsel in preparing, reviewing, and reconciling
necessary reports of transactions to the SEC. The Compliance Officers will also be responsible for reviewing and approving Rule 10b5-1 plans and generally implementing
the securities trading procedures described in this Program.
V.
Dissemination of Securities Law Policy Statements.
A.
Directors, Executive Officers, and Access Group Employees.
Each of our directors, executive officers and Access Group Employees will be required to read and sign a Securities Law Policy Statement substantially in the form
attached as Exhibit A.
In addition, each director and executive officer will be furnished and will be required to read a Securities Law Compliance Manual prepared by our corporate
counsel and outlining the securities laws requirements applicable to them.
B.
All Other Employees.
A Policy Statement substantially in the form attached as Exhibit B will be added to our Employee Handbook to inform all other employees of their responsibilities
under the securities laws and our compliance policy.
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SCHEDULE 1
Access Group Employees
Rocky Brands, Inc. “Access Group Employees” include:
1. All non-executive officers of our Company.
2. Certain first reports and administrative assistants to all officers of our Company.
3. All employees responsible for preparing or having access to financial reports and projections of our Company.
4. Such other persons as may be determined from time to time by our Board of Directors or our Compliance Officers
The Compliance Officers will maintain a current list of Access Group Employees and notify employees who are included on the list.
SCHEDULE 2
Communications Officers
Jason Brooks – Chairman, President and Chief Executive Officer
Tom Robertson – Chief Operating Officer, Chief Financial Officer and Treasurer
SCHEDULE 3
Compliance Officers
Tom Robertson – Chief Operating Officer, Chief Financial Officer and Treasurer
Jeremy D. Siegfried – Secretary
-10-
EXHIBIT A
ROCKY BRANDS, INC.
Securities Law Policy Statement
(To be signed by Directors, Executive Officers and Access Group Employees)
By signing below, I acknowledge the following rules as forming the basic policy of Rocky Brands, Inc. (the “Company”) for employees regarding compliance with
the securities laws. I understand that the securities laws impose civil and criminal penalties on employees of public companies and others for violating insider trading and
other provisions. I understand that I can be liable for civil and criminal penalties for merely passing along information, even if I do not personally trade or profit.
1. I will not disclose material non-public information about the Company to any person, except on a need-to-know basis as a part of my job. I
understand that material non-public information includes any information that, if it were made public, would be important to a reasonable investor in the decision to buy,
hold or sell our Company’s stock. Both positive and negative information can be material. Examples of information that may be regarded as material include: projections of
future earnings or losses; unpublished sales and earnings numbers; an undisclosed but declared stock dividend or a stock split; the undisclosed plan of a sale by our
Company of additional stock; unannounced changes in senior management; and an undisclosed plan for a significant acquisition or divestiture of assets or a merger.
2. I will not answer questions from any person regarding material non-public information regarding our Company, including results of operations.
All questions from the press, analysts, brokers, shareholders or the financial community generally shall be referred to one of our Company’s Communications Officers
designated from time to time by the Board of Directors.
3. I will not buy or sell our Company’s securities without first receiving pre-clearance from a Compliance Officer prior to placing my order. I
understand that this applies to any account in which I or my spouse or any member of my household has a direct or indirect interest, including trusts and retirement
accounts, etc. Pre-clearance approval may be obtained from one of our Company’s Compliance Officers as designated from time to time by the Board of Directors.
Following the approval, I will also report the details of each trade, including the name of my broker, the type of transaction (e.g., purchase or sale), and the date and price of
the transaction to one of the Compliance Officers as soon as possible. If I am a member of the Board of Directors or an executive officer designated as an SEC Reporting
Person, I understand that I am also responsible for compliance with the requirements of SEC Rule 144. I will provide written notice to each broker where I or one of my
household members maintains a securities account (and will furnish a copy of that notice to one of the Compliance Officers), that I am, as the case may be, a member of the
Board of Directors, an executive officer designated as an SEC Reporting Person, or a member of the Access Group as designated by the Board of Directors or the
Compliance Officer.
-11-
4. I will not engage in short sales or options trading in our Company’s securities.
5. I will not purchase or hold our Company’s securities on margin without first receiving clearance from the Company’s Compliance Officers.
6. I will report any violation or suspected violation of these rules by myself or any other person as soon as possible to either a Compliance Officer or
our Company’s counsel.
I have read and understand the foregoing policy statement, have been given a copy to retain for my reference, and agree to be bound by its terms, and I understand
that I can be subject to discipline up to and including termination from employment for violating any of the above rules.
Date:_____________________
_______________________________________
Signature
Printed Name: ____________________________
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EXHIBIT B
ROCKY BRANDS, INC.
[Insert for Employee Handbook]
Securities Law Compliance Policy
This Policy Statement is a part of our Company’s Securities Law Compliance Program, which is designed to inform all employees of their obligations under the
securities laws as employees of a public company. The securities laws impose civil and criminal penalties on employees of public companies and others for violating insider
trading and other provisions. This policy statement is intended to give employees the basic rules. You should contact your immediate supervisor if you have questions or
need additional information.
Material non-public information must not be disclosed to anyone, except to persons within our Company whose positions require them to know it.
Employees whose jobs cause them to possess material inside information should treat it carefully to avoid even inadvertent disclosure. Employees are not permitted to
answer questions from any person regarding non-public information regarding Rocky Brands, Inc. (our Company), including results of operations. All questions from the
press, securities analysts, brokers, or others shall be referred to your immediate supervisor.
What is material inside information? Any non-public information that, if it were made public, would be important to a reasonable investor in the decision to buy,
hold or sell our Company’s securities is material. Both positive and negative information about our Company can be material. As a practical matter, employees should ask
themselves: “Would this non-public information be likely to result in an increase or decrease in the price of our Company’s stock?” Examples of information that is often
regarded as material include: projections of future earnings or losses; unpublished sales and earnings numbers; an undisclosed but declared stock dividend or stock split; the
undisclosed sale by our Company of additional stock; changes in our senior management; and an undisclosed plan for a significant acquisition or divestiture of assets or a
merger.
No employee may place a purchase or sale order, or recommend that another person place a purchase or sale order, in our Company’s securities when he
or she has knowledge of material information concerning our Company that has not been disclosed to the public. If an employee is in possession of material non-
public information about our Company, they must refrain from trading in our Company’s stock or recommending that others do so. The exercise of employee stock options
is not subject to this Policy. However, Company stock that was acquired upon exercise of a stock option will be treated like any other of the Company’s securities, and may
not be sold by an employee who is in possession of material non-public information. Any employee who possesses material inside information should wait until the start of
the second business day after the information has been publicly released before trading. The restrictions applicable to our employees apply equally to family members (and
others) who share a household with such employees.
-13-
Although our Company encourages employees to own our common stock, employees should avoid frequent (speculative) trading in our Company’s
common stock. Investing in our Company’s common stock provides an opportunity to share in the future growth of the Company. However, investment in our Company
and sharing in our growth does not mean short-range speculation based on fluctuations in the market. Such activities put the personal gain of the employee in conflict with
the best interest of our Company and shareholders.
Employees are required to report any violation or suspected violation of this Policy statement soon as possible to Human Resources. Employees can be
subject to disciplinary action up to and including termination of employment for violating this Policy statement.
-14-
Exhibit 21
Subsidiaries of Rocky Brands, Inc. as of March 17, 2025
Five Star Enterprises Ltd.,
a Cayman Islands corporation
Lifestyle Footwear, Inc.,
a Delaware corporation
Rocky Brands Canada, Inc.,
a Nova Scotia corporation
Rocky Brands US, LLC,
a Delaware limited liability company
Rocky Brands International, LLC
an Ohio limited liability company
Lehigh Outfitters, LLC,
a Delaware limited liability company
US Footwear Holdings, LLC
a Delaware limited liability company
Rocky Outdoor Gear Store, LLC
an Ohio limited liability company
Rocky Brands (Australia) Pty Ltd.
an Australian limited liability company
Mexico FW Holdings, S. de R.L. de C.V.
a Mexico private limited liability company
Rocky Footwear (Chuzhou) Co. Ltd.
a China private limited liability company
UK Footwear Holdings Limited
a UK private limited company
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-280503, 333-263565, 333-258610 and 333-198167 on Form S-8 of our reports dated
March 17, 2025, relating to the consolidated financial statements of Rocky Brands, Inc. and subsidiaries and the effectiveness of Rocky Brands, Inc. and subsidiaries
internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2024.
/s/ DELOITTE & TOUCHE LLP
Columbus, Ohio
March 17, 2025
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Annual Report on Form 10-K of Rocky Brands, Inc. and Subsidiaries for the year ended December 31, 2024 of
our reports dated March 15, 2024 included in its Registration Statement on Forms S-8 (No. 333-198167, and No. 333-258610 and No. 333-263565) relating to the
consolidated financial statements and financial statement schedule and internal controls for the years ended December 31, 2024, 2023 and 2022 listed in the accompanying
index.
/s/ Schneider Downs & Co., Inc.
Columbus, Ohio
March 17, 2025
Exhibit 24
POWER OF ATTORNEY
Each director and officer of Rocky Brands, Inc., an Ohio corporation (the “Company”), whose signature appears below hereby appoints Jason Brooks and Curtis A.
Loveland, or either of them, as his attorney-in-fact, to sign, in his name and behalf and in any and all capacities stated below, and to cause to be filed with the Securities and
Exchange Commission, the Company's Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended December 31, 2024, and likewise to sign and file any
amendments, including post-effective amendments, to the Annual Report, and the Company hereby also appoints such persons as its attorneys-in-fact and each of them as its
attorney-in-fact with like authority to sign and file the Annual Report and any amendments thereto in its name and behalf, each such person and the Company hereby
granting to such attorney-in-fact full power of substitution and revocation, and hereby ratifying all that such attorney-in-fact or his substitute may do by virtue hereof.
IN WITNESS WHEREOF, we have executed this Power of Attorney, in counterparts if necessary, effective as of March 17, 2025.
DIRECTORS/OFFICERS:
Signature
Title
/s/ Jason S. Brooks
Chairman, President and Chief Executive Officer
Jason S. Brooks
(Principal Executive Officer)
/s/ Thomas D. Robertson
Chief Financial Officer, Chief Operating Officer and Treasurer
Thomas D. Robertson
(Principal Financial and Accounting Officer)
/s/ Curtis A. Loveland
Assistant Secretary and Director
Curtis A. Loveland
/s/ Michael L. Finn
Director
Michael L. Finn
/s/ Robyn R. Hahn
Director
Robyn R. Hahn
/s/ G. Courtney Haning
Lead Director
G. Courtney Haning
/s/ William L. Jordan
Director
William L. Jordan
/s/ Robert B. Moore, Jr.
Director
Robert B. Moore, Jr.
/s/ Dwight E. Smith
Director
Dwight E. Smith
/s/ Tracie A. Winbigler
Director
Tracie A. Winbigler
Exhibit 31.1
CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a) OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL
OFFICER
I, Jason Brooks, certify that:
1.
I have reviewed this annual report on Form 10-K of Rocky Brands, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being prepared;
(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting;
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: March 17, 2025
/s/ Jason Brooks
Jason Brooks
Chairman, President and Chief Executive Officer (Principal Executive Officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a) OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL
OFFICER
I, Thomas D. Robertson, certify that:
1.
I have reviewed this annual report on Form 10-K of Rocky Brands, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being prepared;
(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting;
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: March 17, 2025
/s/ Thomas D. Robertson
Thomas D. Robertson
Chief Financial Officer, Chief Operating Officer and Treasurer
(Principal Financial and Accounting Officer)
Exhibit 32
CERTIFICATION PURSUANT TO RULE 13a - 14(b) AND
SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE
UNITED STATES CODE AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Rocky Brands, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2024 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States
Code as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Jason Brooks
Jason Brooks
Chairman, President and Chief Executive Officer (Principal
Executive Officer)
March 17, 2025
/s/ Thomas D. Robertson
Thomas D. Robertson
Chief Financial Officer, Chief Operating Officer and Treasurer
(Principal Financial and Accounting Officer)
March 17, 2025
This certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 1350 of
Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that
Section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as otherwise
stated in such filing.