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What changed in ROCKY BRANDS, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ROCKY BRANDS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+218 added−197 removedSource: 10-K (2025-03-17) vs 10-K (2024-03-15)

Top changes in ROCKY BRANDS, INC.'s 2024 10-K

218 paragraphs added · 197 removed · 145 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

54 edited+2 added−6 removed67 unchanged
Biggest changeOur Wholesale distribution channels vary by market: ● Our outdoor products are sold primarily through sporting goods stores, outdoor specialty stores, online retailers, catalogs and mass merchants; ● 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 duty products are sold primarily through uniform stores, catalog specialists and online 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 western products are sold through western stores, work stores, specialty farm and ranch stores, online retailers, and fashion-oriented footwear retailers.
Biggest changeOur 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.
We are a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names including Rocky, The Original Muck Boot Company ("Muck"), Georgia Boot, Durango, XTRATUF, Lehigh, Ranger and the licensed brand Michelin.
We are a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names, including 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: outdoor, work, duty, commercial military, military and western.
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.
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 Rocky, Muck, Georgia Boot, Durango, XTRATUF, Lehigh, Ranger and Michelin products through a wide range of wholesale distribution channels throughout the world.
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.
These products incorporate a range of technical features and designs such 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.
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.
We believe the Rocky, Muck, Georgia Boot, Durango, XTRATUF, Lehigh, Ranger and Michelin brands are well recognized and established names that have a reputation for performance, quality and comfort in the markets they serve: outdoor, work, western, duty, commercial military and military.
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.
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, Dominican Republic and Mexico. We do not have long-term contracts with any of our third-party manufacturers.
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.
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. 7 Table of Contents 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 the business taken as a whole.
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. 7 Table of Contents 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.
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, and oil & gas occupations. These products typically include many of the proprietary features and technologies that we incorporate in our hunting and outdoor products.
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 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 marketplace. ● Long-term retailer relationships.
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.
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 corporations that require and provide a subsidy to their employees to wear safety footwear.
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.
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 $74.00 to $100.00 .
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 .
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 marketplace.
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.
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 $157.00 to $237.00 .
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 .
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. ● Western.
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.
O ur products are primarily distributed in the U.S., Canada, 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.
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.
Intellectual Property We rely on a combination of our trademarks, patents, trade dress, 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.
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 believe a critical component of our success in the 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 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.
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 $274.00 .
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 .
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: ● Outdoor.
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 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. ● Work.
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 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 marketplace.
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.
The Rocky brand originally targeted outdoor enthusiasts, particularly hunters, and has since become a market leader in the hunting boot 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.
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.
We sell to wholesale accounts in the U.S. through the use of a dedicated in-house sales team, and exclusive, as well as independent, sales representatives who carry our branded products and other non-competing products.
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 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 rockyboots.com , georgiaboot.com , durangoboot.com, muckbootcompany.com, xtratuf.com, lehighoutfitters.com, lehighsafetyshoes.com and slipgrips.com , as well as through online marketplaces.
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, a nd slipgrips.com , as well as through online third-party marketplaces.
As of December 31, 2023 , 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.
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.
XTRATUF Since the early 1950s, XTRATUF has been a leading outfitter in the commercial, sport, and recreational fishing segment, having provided fishermen with capable, comfortable and reliable footwear for use in the harshest conditions.
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.
Our footwear products incorporate varying features and are positioned across a range of suggested retail price points from $45.00 for our value priced products to $655.00 for our premium products.
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.
Georgia Boot footwear is sold at suggested U.S. retail price points ranging from $76.00 to $292.00 . 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.
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.
Fueled by the strong growth in the outdoor segment; 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 $45.00 to $195.00 .
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 .
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. ● Duty.
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.
Approximately 1,600 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.
Approximately 1,690 of ou r 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.
All of our sales people 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.
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 sales force is organized around major accounts, including Boot Barn, Tractor Supply Company and Amazon, and around our target markets: outdoor, work, duty, commercial military, and western. Our sales force is also organized around brands, regions and customers in order to target a broad range of distribution channels.
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.
O ur 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 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.
Over the last 50 years, 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.
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.
We focus on attracting, developing and retaining highly talented individuals through practices that promote inclusion, diversity and equality. 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.
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.
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. ● Military. Our military product line consists of footwear products designed specifically for U.S. Military personnel.
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.
In 2023, we fulfilled two multi-year contracts for the U.S. Military. 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: Rocky, Muck, Georgia Boot, Durango, XTRATUF, Lehigh and Ranger, in addition to the licensed brand Michelin.
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.
We own numerous U.S. and foreign registrations for the patents and trademarks used in our business, including our major brands Rocky, Muck, Georgia Boot, Durango, XTRATUF, Lehigh, and Ranger. In addition, we license the use of third-party trademarks, including Gore-Tex and Michelin, in order to market our products. Our license with W. L. Gore & Associates, Inc.
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 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, 2023 , we had approximately 2,100 employees of which approximately 2,060 are full time employees.
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 approxi mately 2,535 employees of which approximately 2,530 are full time employees.
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.
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.
Through widespread consumer validation in the farm, agriculture, hunt and equestrian segments, Muck has been able to expand to new segments 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 who have adopted the brand and its offerings.
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.
Military sales, which are shipped directly from our manufacturing facility in Puerto R ico. Net sales to foreign countries represented approximately 5.1% of net sales in 2023 and 6.2% of ne t sales in 2022. As previously mentioned, we maintain manufacturing facilities that we operate in the Dominican Republic and Chuzhou, China.
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.
Quarterly, our CEO a nd 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. 8 Table of Contents We are committed to having a diverse and inclusive workforce which is reflected in a wide range of cultures, religions, ethnicities and nationalities as well as varied professional and educational backgrounds.
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. 8 Table of Contents We are committed to having a workforce which reflects a wide range of perspectives as well as varied professional and educational backgrounds.
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.
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.
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. ● Commercial Military.
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 o ur footwear products. ● Military. Our military product line consists of footwear products designed specifically for U.S. Military personnel.
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: $92.00 to $405.00 for our footwear products; and $18.00 to $160.00 for our apparel and accessory lines.
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 principal raw materials used in the production of our products, in terms of dollar value, are leather, Gore-Tex waterproof breathable fabric, Cordura nylon fabric and soling materials. We believe these materials will continue to be available from our current suppliers.
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.
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. Georgia Boot Georgia Boot was launched in 1937 and is our moderately priced, high quality line of work and rugged lifestyle footwear.
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.
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 $11.9 million at December 31, 2023, of which approximatel y $3.9 million resides i n the Dominican Republic and approximatel y $8.0 mil lion resides in 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.
Our current line of Muck footwear products is offered at suggested U.S. retail price points ranging from $55.00 to $265.00 .
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 .
We have also introduced western influenced work boots for farmers and ranchers. Most of these products are waterproof, insulated and utilize our proprietary comfort systems. 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.
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.
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 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.
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We report our segment information in accordance with provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 280, Segment Reporting and each of our reporting segments continue to employ consistent accounting policies. S ee Note 1 9 of our Consolidated Financial Statements fo r further information.
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S ee Note 19 - Segment Information of our Consolidated Financial Statements fo r further information.
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We also produce Rocky duty and commercial military, public service footwear targeting law enforcement professionals, military, security workers, fire industry professionals and postal service employees, and we have established leading market share positions in these categories.
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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.
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Resources and Suppliers We purchase raw materials from sources worldwide. We do not have any long-term supply contracts for the purchase of our raw materials, except for limited blanket purchase orders on leather to protect wholesale selling prices for an extended period of time.
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("Gore") permits us to use the Gore-Tex and related marks on products and styles that have been approved in advance by Gore.
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The license agreement has a one-year term that automatically renews each year, unless either party elects to terminate by giving advance written notice to the other party by October 1 for termination effective December 31 of that same year. Similarly, our license with Michelin Lifestyle Limited permits us to use the Michelin brand and related marks on our products.
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We believe that the inclusion of diverse perspectives results in better outcomes and policies. We aim to foster an inclusive workplace through recruitment and development efforts, and through the retention of diverse talent with a goal of expanding representation across all dimensions of equality and inclusion.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

29 edited+11 added−2 removed90 unchanged
Biggest changeSome 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. 13 Table of Contents A cyber-security breach could have a material adverse effect on our business and reputation .
Biggest changeRemote work could also introduce operational risk such as, but not limited to, cyber security risks. 13 Table of Contents 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”).
We own U.S. registrations for many our trademarks, trade names and designs, including such marks as Rocky, Muck, Georgia Boot, Durango, XTRATUF, Lehigh 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.
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.
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 operating expenses, and there can be no assurance that we will have the resources necessary to undertake such efforts.
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.
The carrying value of intangibles represents the fair value of trade names and other acquired intangibles as of the acquisition date. Acquired 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.
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.
Material increases in our operating 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.
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.
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 marketplace from traditional independent retailers to large mass merchandisers may result in decreased margins.
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.
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 customers, and the loss of a key customer could have a material adverse effect on our financial condition and results of operations.
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.
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, taxes or other charges or restrictions; ● foreign governmental regulation and taxation, including tariffs, import and export controls and other non-tariff barriers; ● fluctuations in foreign exchange rates; ● changes in economic conditions, including expropriation and nationalization; ● transportation conditions and costs in the Pacific and Caribbean; ● changes in the political stability of these countries; ● labor disputes and other work stoppages or interruptions; 9 Table of Contents ● changes in relationships between the U.S. and these countries; and ● the occurrence of contagious disease or illness.
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; ● foreign governmental regulation and taxation, including tariffs, import and export controls and other non-tariff barriers; ● fluctuations in foreign exchange rates; ● changes in economic conditions, including expropriation and nationalization; ● transportation conditions and costs in the Pacific and Caribbean; ● changes in the political stability of these countries; ● labor disputes and other work stoppages or interruptions; 9 Table of Contents ● changes in relationships between the U.S. and these countries; and ● the occurrence of contagious disease or illness.
A continued shift in the 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.
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.
Because of 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.
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.
Such failures or disruptions could prevent access to our online services and preclude retail transactions. 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.
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.
The principal raw materials used in the production of our footwear, in terms of dollar value, are leather, Gore-Tex waterproof breathable fabric, 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.
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.
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 could adversely affect our business Our information technology systems are critical to our business operations.
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.
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 or severe weather due to climate change.
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.
Our credit facilities contain restrictive covenants which requires us to maintain a maximum total average ratio and a minimum fixed charge coverage ratio. Interest rate increases could adversely affect our financial results.
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.
Any natural disaster or other serious disruption at any of these facilities due to fire, tornado, flood, 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 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.
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. We are making technology investments in our websites and mobile applications.
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.
A majority of our products are produced outside the U.S. where we are subject to the risks of international commerc e and other international conditions . A majority of our products are produced in China, the D ominican Republic, and Vietnam.
A majority of our products are produced outside the continental U.S. where we are subject to the risks of international commerc e and other international conditions . The majority of our products are produced in China, the Dominican Republic, Puerto Rico, Vietnam, India, and Mexico.
Factors such as 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.
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.
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.
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 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. We are subject to periodic litigation and other regulatory proceedings, which could result in the unexpected expenditure of time and resources.
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.
We purchase raw materials from a number of domestic and foreign sources. We do not have any long-term supply contracts for the purchase of our raw materials, except for limited blanket orders on leather.
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.
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. The occurrence of any of these developments could have a material adverse effect on our business, financial condition, results of operations and cash flows.
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.
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.
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.
If we do not effectively respond to the shift of consumer shopping moving to online retailers , including third-party marketplaces, it may negatively impact our business. The retail industry is rapidly changing and we must ensure we are evolving both our own online e-commerce websites and third-party marketplaces.
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.
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.
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.
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 any disruption in the supply of such materials could interrupt product manufacturing and increase product costs.
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.
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 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.
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 and Vietnam.
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.
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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.
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This could cause our sales to decline, brand image to suffer and operating performance to deteriorate.
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If we are unable to improve or develop relevant technology in a timely manner, our ability to compete and our results of operations could be adversely affected. 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.
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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; ● reliance on third-party software and service providers; ● 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.
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We source products from manufacturers located outside of the U.S., primarily in China, Vietnam, the Dominican Republic, India, and Mexico.
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Some of our employees are working remotely which could strain our information technology systems and impact business continuity plans.
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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.
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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.
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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.
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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.
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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.
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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.
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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.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Senior Vice President of Information Technology regularly reports to and maintains ongoing dialog with 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.
Biggest changeThis reporting includes updates on matters evaluated under our CIRP, the current threat landscape, cybersecurity initiatives, and the effectiveness of our cybersecurity programs.
This platform is administered across our departments by our cybersecurity team led by our Senior 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).
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).
Although no cybersecurity incidents during the year ended December 31, 2023 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.
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.
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 Senior Vice President of Information Technology leads our information security, data privacy and protection, and information technology compliance programs.
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.
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 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.
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Our Senior Vice President of Information Technology has more than 20 years of cybersecurity experience, is an active Certified Information Systems Security Professional, and trained in assessing and managing cyber risks. 15 Table of Contents
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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.
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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. 15 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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We own the following properties as of December 31, 2023: Purpose Location Square Footage Utilized Segments Executive Office Nelsonville, Ohio 24,400 Wholesale, Retail, Contract Manufacturing Executive Office and Outlet Store Nelsonville, Ohio 52,300 Wholesale and Retail Executive Office Nelsonville, Ohio 8,800 Wholesale, Retail, Contract Manufacturing Storage Facility Nelsonville, Ohio 8,400 Wholesale, Retail, Contract Manufacturing Distribution Center Logan, Ohio 316,000 Wholesale, Retail, Contract Manufacturing Manufacturing Facility Chuzhou, China 576,000 Wholesale and Retail We lease the following properties as of December 31, 2023: Purpose Location Square Footage Utilized Segments Lease Expiration Office Building China 5,600 Wholesale and Retail 2024 Distribution Center Reno, Nevada 355,680 Wholesale, Retail, Contract Manufacturing 2026 Manufacturing Facility Puerto Rico 84,600 Wholesale and Contract Manufacturing 2027 Manufacturing Facility Puerto Rico 22,700 Wholesale and Contract Manufacturing 2027 Manufacturing Facility Dominican Republic 29,700 Wholesale and Contract Manufacturing 2023 (1) Manufacturing Facility Dominican Republic 34,400 Wholesale and Contract Manufacturing 2023 (1) Manufacturing Facility Dominican Republic 20,100 Wholesale and Contract Manufacturing 2023 (1) Manufacturing Facility Dominican Republic 93,700 Wholesale and Contract Manufacturing 2024 Manufacturing Facility Dominican Republic 36,200 Wholesale and Contract Manufacturing 2024 Manufacturing Facility Dominican Republic 16,800 Wholesale and Contract Manufacturing 2026 Manufacturing Facility Dominican Republic 30,200 Wholesale and Contract Manufacturing 2025 (1) These leases expired in 2023 and we are currently occupying the spaces on a month-to-month basis until a new agreement is reached.
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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.
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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.
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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.
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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

Legal Proceedings — active lawsuits and investigations

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Biggest changeA disc ussion of legal matters is f ound in Note 2 1 of our Consolidated Financial Statements included in Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Biggest changeA disc ussion of legal matters is f ound 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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe have not announced a new repurchase program since the prior program’s expiration and there have been no purchases of common stock since the repurchase program expired. 17 Table of Contents 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.
Biggest changeThis repurchase program replaces the previous repurchase program authorized by the board of directors that expired on March 4, 2022. 17 Table of Contents 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, 2018 and in the NASDAQ Stock Market (U.S.) Index and the Standard & Poor's Footwear Index and that all dividends were reinvested.
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.
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 29, 2024, there were 69 sha reholders of record of our common stock.
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 Our previous $7,500,000 share repurchase program expired on March 4, 2022.
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.
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This comparison includes the period ended December 31, 2018 through the period ended December 31, 2023. For information regarding Rocky Brands' equity compensation plans, see Part III, Item 12 of this Annual Report on Form 10-K. ITEM 6. [RESERVED]
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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.
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This comparison includes the period ended December 31, 2019 through the period ended December 31, 2024 . ITEM 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeContract Manufacturing gross margin as a percentage of net sales decreased for the twelve months ended 2023 compared to 2022 due to certain private label contracts that carried lower margins. 21 Table of Contents Twelve Months Ended December 31, ($ in thousands) 2023 2022 Inc./ (Dec.) Inc./ (Dec.) OPERATING EXPENSES: Operating Expenses $ 143,226 $ 181,181 $ (37,955 ) (20.9 )% % of Net Sales 31.0 % 29.4 % 1.6 % The reduction in operating expenses for the twelve months ending December 31, 2023 was driven by lower out-bound freight expense and other variable expenses stemming from decreased sales volumes.
Biggest changeMilitary which carried higher margins than private label sales. 21 Table of Contents 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.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements made by or on behalf of the Company. 18 Table of Contents 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 Rocky, Muck, Georgia Boot, Durango, XTRATUF, Lehigh, Ranger and the licensed brand Michelin.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements made by or on behalf of the Company. 18 Table of Contents 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: outdoor, work, duty, commercial military, military and western.
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.
We conclude our MD&A with information on recent accounting pronouncements which 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.
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.
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., Canada, U.K., and other international markets such as Europe.
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.
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, 2023 and 2022, and our capital resources and liquidity as of December 31, 2023 and 2022.
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 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 trade names was determined based on the Income Approach using the Relief from Royalty Method.
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.
Our footwear products incorporate varying features and are positioned across a range of suggested retail price points from $45.00 for our value priced products to $655.00 for our premium products.
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.
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.
("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.
For the discussion of the changes in our results of operations between the years ended December 31, 2022 and December 31, 2021, 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, 2022, filed with the SEC on March 10, 2023, which is available on the SEC's website at https://www.sec.gov/edgar/search/ and our corporate website at www.rockybrands.com .
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 .
The Servus brand was sold to allow us to focus on our more profitable core brands and allocate resources toward growth and development of additional opportunities with those brands moving forward. During the third quarter of 2023, we closed our manufacturing facility in Rock Island, Illinois.
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.
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 during the first quarter was recorded within Interest Expense and Other - net in the Consolidated Statements of Operations for the year ended December 31, 2023.
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.
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.
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.
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 operating expenses to which there can be no assurance that we will have the resources necessary to undertake such efforts.
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.
The net change in working capital and other assets and liabilities resulted in an increase to cash provided by operating activities of $51.3 million for the year ended December 31, 2023, compared to a decrease of $16.0 million for the year ended December 31, 2022.
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 .
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.
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.
Cash provided by operating activities for the year ended December 31, 2023 was $73.6 million compared to $19.1 million for the year ended December 31, 2022. Adjusting for non-cash items, net income provided a cash in-flow of $22.3 million and $35.1 million for the years ended December 31, 2023 and 2022, respectively.
Net c ash 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.
For additional information see Note 13 of our Consolidated Financial Statements. 24 Table of Contents RECENT FINANCIAL ACCOUNTING PRONOUNCEMENTS Refer to Note 2 to 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.
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.
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 4 ).
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.
Our working capital fluctuates throughout the year as a result of our seasonal business cycle and business expansion, and is generally lowe st in the months of January through March of each year and highest during the months of May through October of each year. We historically utilize our revolving credit facility to fund our seasonal working capital requirements.
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 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.
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.
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 2023. 2023 FINANCIAL OVERVIEW ● Net sales decreased 25.0% to $461.8 million ● Gross margin increased 210 basis points to 38.7% ● Operating income decreased 19.7% to $35.4 million ● Net income decreased 49.1% to $10.4 million, or $1.41 per diluted share ● Total debt, net of debt issuance costs, decreased 32.6% to $173.1 million 19 Table of Contents ● Inventory decreased 28.1% to $169.2 million ● Cash provided by operating activities increased 285% to $54.5 million We experienced a decline in sales of 25.0% to $461.8 million for the year ending December 31, 2023 compared to the year ending December 31, 2022, primarily attributable to our Wholesale segment.
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; 19 Table of Contents ● 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.
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.
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 Table of Contents 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.
Retail net sales for the twelve months ended December 31, 2023 increased due to strong growth in our direct-to-consumer e-commerce business. We have enhanced our targeted marketing efforts, primarily through digital marketing, allowing us to increase brand awareness and engage more directly with consumers, which led to increased traffic on our branded websites throughout the year.
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.
Secondly, a greater proportion of Retail segment sales, which carry higher gross margins than our Wholesale and Contract Manufacturing segments, also contributed to the increase. Operating income decreased to $35.4 million in 2023. As a percentage of net sales, operating income was 7.7% in 2023 compared to 7.2% in 2022.
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.
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.
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.
During the year ended December 31, 2023, the net change in working capital was primarily impacted by a decrease in inventory and accounts receivable of $60.0 million and $18.2 million, respectively, partially offset by a decrease in accounts payable of $21.2 million.
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 decrease in Contract Manufacturing sales for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 was due to the expiration of certain contracts with the U.S. Military.
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.
Cash used in financing activities for the twelve months ended December 31, 2023 and 2022 was primarily related to payments on our revolving credit facility and term loan. Our prior $7,500,000 share repurchase program expired on March 4, 2022. F or additional information regarding this share repurchase p rogram, see Note 1 4 of our Consolidated Financial Statements.
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 $7,500,000 share repurchase program.
Retail gross margins as a percentage of net sales decreased slightly for the twelve months ended December 31, 2023 compared to the same period a year ago primarily due to the Lehigh business accounting for a larger percentage of Retail sales which carries lower margins.
Retail gross margins as a percentage of net sales decreased for the twelve months ended December 31, 2024 compared to the same year ago period due to increased promotional efforts across all of our retail channels in order to optimize our inventory levels.
We lease certain machinery, equipment, and manufacturing facilities under operating leases that generally provide for renewal options. Future minimum lease payments under non-cancelable operating leases are outlined in further detail in Note 11 of our Consolidated Financial Statements.
We lease certain machinery, equipment, and manufacturing facilities under operating leases that generally provide for renewal options.
For more information regarding our credit facilities please se e No te 10 . 22 Table of Contents Cash Flows and Material Cash Requirements Twelve Months Ended December 31, ($ in millions) 2023 2022 Operating activities $ 73.6 $ 19.1 Investing activities 13.4 (1.2 ) Financing activities (88.2 ) (18.1 ) Net change in cash and cash equivalents $ (1.2 ) $ (0.2 ) Operating Activities.
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.
With respect to environmental matters, costs are incurred pertaining to regulatory compliance. Such costs have not been, and are not anticipated to become, material. We are contingently liable with respect to lawsuits, taxes and various other matters that routinely arise in the normal course of business. See Note 21 of our Consolidated Financial Statements for further discussion of legal matters.
F or additional information regarding this share repurchase p rogram, 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.
Following the sale of the Servus brand in the first quarter of 2023, the Rock Island facility was underutilized, prompting our decision to close the facility during the third quarter of 2023. In 2023, we were also awarded a new multi-year contract with the U.S.
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.
As of December 31, 2023 we held $4.5 million in cash and cash equivalents and our total indebtedness stood at $173.1 million, a reduction of $84.6 million or 32.6% when compared to December 31, 2022. Of total debt paydown, $40.8 million of this reduction in indebtedness occurred in the fourth quarter 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.
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 sales under this contract are included in our Contract Manufacturing segment. We completed the sale of the NEOS brand during the third quarter of 2022.
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.
Our capital expenditures relate primarily to projects relating to our corporate offices, property, merchandising fixtures, molds and equipment associated with our manufacturing and distribution operations and for information technology. Capital expenditures were $4.3 million for 2023 and $7.3 million in 2022. Capital expenditures f or 2024 a re anticipated t o be approximately $5.5 million.
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.
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, 2023 2022 NET SALES: 100.0 % 100.0 % Cost of goods sold 61.3 63.4 Gross margin 38.7 36.6 Operating expenses 31.0 29.4 Income from operations 7.7 % 7.2 % Gross margin in 2023 was $178.6 million, or 38.7% of net sales, compared to $225.2 million, or 36.6% of net sales, in 2022.
Analysis of Results of Operations The following table sets forth Consolidated Statements of Operations data as percentages of total net sales: Twelve Months Ended December 31, ($ 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 $8.1 million or 1.7% for the twelve months ended December 31, 2024, due to a decrease in Wholesale net sales, partially offset by an increase in Retail and Contract Manufacturing net sales.
Twelve Months Ended December 31, ($ in thousands) 2023 2022 Inc./ (Dec.) Inc./ (Dec.) INCOME TAXES: Income Tax (Benefit) Expense $ 3,728 $ 5,303 $ (1,575 ) (29.7 )% Effective Tax Rate 26.3 % 20.6 % 5.7 % The increase in our effective tax rate for the twelve months ended December 31, 2023 compared to the same year ago period was driven primarily by a return to provision adjustment resulting from foreign tax credits recognized in the fourth quarter of 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.
This method requires us to estimate the future revenues for the related brands, the appropriate royalty rate, and the weighted average cost of capital. After completing our annual impairment test for each reporting unit and our indefinite-lived intangible assets during the fourth quarter of 2023 and 2022, we concluded there was no impairment in either of these years.
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 $4.0 million impairment charge for the Muck trademark.
The 210-basis point improvement was driven primarily by a 150-basis point improvement in Wholesale segment gross margins combined with a higher mix of Retail segment sales, which carry higher gross margins than the Wholesale and Contract Manufacturing segments.
Our Retail reporting segment carries higher gross margins than both our Wholesale and Contract Manufacturing Reporting segments. The increase was offset by a decrease in Retail gross margins as a percentage of net sales in 2024 compared to the prior year.
Our working capital consists primarily of trade receivables and inventory, offset by accounts payable and accrued expenses.
Our primary ongoing operating cash flow requirements are for inventory purchases and other working capital needs, capital expenditures, and payments on our credit facilities. Our working capital consists primarily of trade receivables and inventory, offset by short-term debt and accounts payable.
Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate. Therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate.
Risk Factors" in this Annual Report on Form 10-K and other factors detailed from time to time in our filings with the Securities and Exchange Commission. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate.
Twelve Months Ended December 31, ($ in thousands) 2023 2022 Inc./ (Dec.) Inc./ (Dec.) NET SALES: Wholesale $ 337,019 $ 484,779 $ (147,760 ) (30.5 )% Retail 116,960 115,354 1,606 1.4 Contract Manufacturing 7,854 15,342 (7,488 ) (48.8 ) Total Net Sales $ 461,833 $ 615,475 $ (153,642 ) (25.0 )% 20 Table of Contents The decrease in Wholesale sales for the twelve months ended December 31, 2023 was due to elevated inventory levels at our retail partners within our Wholesale channel and a softer demand environment compared to the year ago period.
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 )% 20 Table of Contents 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.
The decrease in inventory during the year ended December 31, 2023 compared to the prior period was due to a concentrated effort to optimize inventory levels in 2023 through increased promotions aimed at selling discontinued inventory, lower production and purchasing.
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.
Income from operations in 2023 was $35.4 million, or 7.7% of net sales, compared to $44.0 million, or 7.2% of net sales, in 2022. This increase was due to the increases in gross margin as a percentage of net sales noted above.
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.
Significant accounting policies are summarized in Note 1 to the Company's Consolidated Financial Statements. Revenue recognition Revenue principally consists of sales to customers, and, to a lesser extent, license fees. See N ote 1 and Note 17 of our Consolidated Financial Statements for additional information regarding revenues.
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 actual amount of sales returns and allowances realized may differ from our estimates. If we determine that sales returns or allowances should be either increased or decreased, then the adjustment would be made to net sales in the period in which such a determination is made.
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.
Removed
Acquired in March of 2021 as a part of our acquisition of the performance and lifestyle footwear business of Honeywell International Inc, this facility primarily manufactured product for the Servus brand.
Added
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.
Removed
The sale of NEOS inventory was recorded within net sales and cost of goods sold within the Consolidated Statements of Operations for the year ended December 31, 2022. The gain on sale of the NEOS assets is recorded as a reduction of operating expenses within the Consolidated Statements of Operations for the year ended December 31, 2022.
Added
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.
Removed
Material increases in our operating 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.
Added
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.
Removed
The sales decline in our Wholesale segment was due to a challenging macroeconomic environment, coupled with our wholesale partners working through excess inventories. Additionally, distribution challenges in 2021 led to delayed delivery of Fall 2021 inventory into the first half of 2022, creating a difficult year-over-year comparison for the first nine months of 2023.
Added
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.
Removed
While our 2023 performance was challenged by a difficult macroeconomic backdrop and a tough year-over-year comparison for our Wholesale segment, we experienced strong retail sell-through and increased performance of our own e-commerce websites, which partially offset the decrease in Wholesale sales. During the year ending December 31, 2023, our gross margin improved 210 basis points to 38.7%.
Added
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.
Removed
The increase in gross margin for the year ending December 31, 2023 compared to the year ending December 31, 2022 was due to several factors. First, higher Wholesale segment gross margins resulted from the realization of pricing actions taken the second half of 2022 and a reduction in inbound logistics costs.
Added
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.
Removed
The increase in operating income as a percentage of net sales was attributed to reorganization changes made during 2023 in an effort to leverage top-line sales and decrease operating expenses. As a percentage of net sales, our gross margin increased 210 basis points year over year while operating expenses only increased 160 basis points.
Added
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.
Removed
The overall increase in operating expenses as a percentage of net sales for full year 2023, when compared to the year ago period, was attributable to costs incurred prior to realizing the benefits from cost-savings reviews and operational efficiencies implemented by management through strategic initiatives, particularly in the first half of 2023.
Added
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.
Removed
This was partially offset by lower variable costs associated with lower net sales. Additionally, operating expenses as a percentage of net sales decreased in the latter half of 2023 compared to the same period a year ago.
Added
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.
Removed
This created a reduction in interest expense in the fourth quarter of 2023 over the prior period for the first time since incurring our debt, despite increased interest rates on both of our credit facilities. The reduction in indebtedness was attributable to our strategic efforts to optimize inventory levels.
Added
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.
Removed
At the end of the fourth quarter, inventories totaled $169.2 million, reflecting a decrease of $66.2 million or 28.1% compared to $235.4 million a year ago.
Added
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.
Removed
Our business generated cash flows from operations of $73.6 million for the year ending December 31, 2023, an increase of 285%, from $19.1 million of cash flows from operations generated for the year ending December 31, 2022.
Added
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.
Removed
The 2023 cash flow from operations was primarily attributable to strategic inventory management, and improved collections on outstanding accounts receivable, partially offset by payments on our accounts payable. In terms of cash flows from investing activities, we generated $17.3 million from the sale of the Servus brand, partially offset by $3.9 million in fixed assets purchases.
Added
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.
Removed
As noted above, cash used for financing activities included an $84.6 million debt paydown and $4.6 million dividend payment to our shareholders. Despite facing challenges in 2023 due to a challenging macroeconomic backdrop and elevated inventory levels at several Wholesale partners, we believe the underlying fundamentals of our business and brand portfolio remain robust.
Added
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.
Removed
Operationally and financially, we believe we are well-positioned to make strategic investments in growth in future years. Throughout 2023, our reported results showed improvement, driven by strong sell-through of our products, and ongoing improvements to overall inventory levels at the majority of our wholesale accounts, positively influencing our sell-in.
Added
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.
Removed
Our focus on product innovation, brand building, consumer connections and fulfillment capabilities, has continued to strengthen with these efforts starting to yield positive results in the second half of 2023.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign Exchange Risk We face market risk to the extent that changes in foreign currency exchange rates affect our foreign assets, liabilities and inventory purchase commitments. 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. 25 Table of Contents
Biggest changeWe 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. 25 Table of Contents
We do not have any interest rate management agreements as of December 31, 2023. 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.
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.
Interest Rate Risk Our primary exposure to market risk includes interest rate fluctuations in connection with our senior term facility and revolving credit facility. Our senior term and revolving credit facilities are tied to changes in applicable interest rates, including SOFR, company performance and total borrowings under our revolving credit facility.
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, 2023, we ha d $175.0 million of debt consisting of $77.9 million under our senior term facility and $97.1 m illion under our revolving credit facility. For additional information about our credit facilities see Note 10 . We do not hold any market risk sensitive instruments for trading purposes.
As of December 31, 2024 , we ha d $131.0 million of debt consisting of $35.1 million under our Term Facility and $95.9 m illion 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.
Added
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.

Other RCKY 10-K year-over-year comparisons