Net Sales Increased 2.2% to $112.9
Million
Operating Income Increased 92% to $8.0
Million
Inventories Down 26% Year-over-Year to
$165.1 Million
Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial
results for its first quarter ended March 31, 2024.
First Quarter 2024
Overview
- Net sales increased 2.2% to $112.9 million and increased 7.6%
excluding Servus brand net sales from the year ago period
- Operating income increased 92.1% to $8.0 million, or 76.4% to
$8.7 million on an adjusted basis
- Net income was $2.6 million, or $0.34 per diluted share, as
compared to net loss of $0.4 million or $0.05 per diluted share in
the year ago period
- Adjusted net income was $3.1 million, or $0.41 per diluted
share as compared to net loss of $0.8 million or $0.12 per diluted
share in the year ago period
- Inventories decreased 26.3% year-over-year
- Total debt at March 31, 2024 was down 29.0% compared with March
31, 2023
“Our first quarter performance represents a solid start to the
year,” said Jason Brooks, Chairman, President and Chief Executive
Officer. “Cost saving initiatives implemented throughout 2023
allowed us to redeploy a higher portion of our spend toward
advertising programs which fueled stronger than expected growth and
meaningful expense leverage. We are pleased with the top-line
momentum we experienced across our business, highlighted by double
digit gains for our Durango and XTRATUF brands. While the
macroeconomic outlook remains uncertain, we continue to be
cautiously optimistic that the Company is well positioned to
generate enhanced profitability and increased shareholder value as
2024 unfolds.”
First Quarter 2024
Review
First quarter net sales increased 2.2% to $112.9 million
compared with $110.4 million in the first quarter of 2023.
Excluding the Servus brand, which was divested in March 2023, sales
increased 7.6%. Wholesale sales for the first quarter of 2024 were
$79.8 million compared to $80.1 million for the same period in
2023. Excluding the Servus brand, which was divested in March 2023,
Wholesale sales increased 7.0%. Retail sales for the first quarter
of 2024 increased 3.0% to $30.4 million compared to $29.5 million
for the same period last year. Contract Manufacturing sales, which
include contract military sales and private label programs, were
$2.7 million in the first quarter of 2024 compared to $0.9 million
in the prior year period.
Gross margin in the first quarter of 2024 was $44.1 million, or
39.1% of net sales, compared to $43.8 million, or 39.6% of net
sales, for the same period last year, which included a tariff
refund in the first quarter of 2023 with a net impact of
approximately $1.3 million. Excluding this tariff refund, gross
margin increased 70-basis points year-over-year driven by the sale
of the Servus brand which had lower margins than the Company's
current product portfolio.
Operating expenses were $36.2 million, or 32.0% of net sales,
for the first quarter of 2024 compared to $39.6 million, or 35.9%
of net sales, for the same period a year ago. Excluding $0.7
million of acquisition-related amortization in the first quarter of
2024 and $0.8 million in acquisition-related amortization in the
first quarter of 2023, adjusted operating expenses were $35.5
million in the current year period and $38.8 million in the year
ago period. As a percentage of net sales, adjusted operating
expense was 31.4% in the first quarter 2024 compared with 35.2% in
the year ago period. The decrease in operating expenses was largely
attributable to cost-saving reviews and operational efficiencies
achieved through strategic restructuring initiatives implemented in
2023.
Income from operations for the first quarter of 2024 was $8.0
million, or 7.1% of net sales, compared to $4.2 million or 3.8% of
net sales for the same period a year ago. Adjusted operating income
for the first quarter of 2024 was $8.7 million, or 7.7% of net
sales, compared to adjusted operating income of $4.9 million, or
4.5% of net sales a year ago.
Interest expense for the first quarter of 2024 was $4.5 million
compared with $6.0 million in the prior year period. The decrease
was driven by lower debt levels in the first quarter of 2024
compared with the first quarter of 2023.
The Company reported first quarter net income of $2.6 million,
or $0.34 per diluted share, compared to a net loss of $0.4 million,
or $0.05 per diluted share, in the first quarter of 2023. Adjusted
net income for the first quarter of 2024 was $3.1 million, or $0.41
per diluted share, compared to a net loss of $0.8 million, or $0.12
per diluted share, in the year ago period.
Balance Sheet Review
Cash and cash equivalents were $3.1 million at March 31, 2024
compared to $4.9 million on the same date a year ago.
Inventories at March 31, 2024 were $165.1 million, down 26.3%
compared to $224.1 million on the same date a year ago and down
2.4% compared with $169.2 million at December 31, 2023.
Total debt, net of unamortized debt issuance costs, at March 31,
2024 was $156.0 million, consisting of $74.3 million senior term
loan and $83.3 million of borrowings under the Company's senior
secured asset-backed credit facility. Compared with March 31, 2023
and December 31, 2023, total debt at March 31, 2024 was down 29.0%
and 9.9%, respectively.
On April 29, 2024, the Company announced the signing of a
definitive debt refinance agreement with Bank of America, N.A., as
agent. The upsized, amended and extended ABL facility, is comprised
of a $175 million revolving credit facility and a $50 million term
facility, amending and restating the Company’s existing $175
million revolving credit facility with Bank of America. Proceeds
from the refinance were used to retire the Company’s existing
senior secured term loan facility agented by TCW Asset Management
Company, LLC. The combined transactions are expected to generate an
interest savings of approximately $2.9 million for the remainder of
2024, offset by fees and amortization associated with the
retirement of the senior secured term loan facility of
approximately $2.6 million. In 2025, the combined transactions are
expected to generate a combined annualized savings of approximately
$4.4 million.
Conference Call
Information
The Company's conference call to review first quarter 2024
results will be broadcast live over the internet today, Tuesday,
April 30, 2024 at 4:30 pm Eastern Time. Investors and analysts
interested in participating in the call are invited to dial (877)
704-4453 (domestic) or (201) 389-0920 (international). The
conference call will also be available to interested parties
through a live webcast at www.rockybrands.com. Please visit the
website and select the “Investors” link at least 15 minutes prior
to the start of the call to register and download any necessary
software.
About Rocky Brands, Inc.
Rocky Brands, Inc. is a leading designer, manufacturer and
marketer of premium quality footwear and apparel marketed under a
portfolio of well recognized brand names. Brands in the portfolio
include Rocky®, Georgia Boot®, Durango®, Lehigh®, The Original Muck
Boot Company®, XTRATUF® and Ranger®. More information can be found
at RockyBrands.com.
Safe Harbor Language
This press release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of
1934, as amended, which are intended to be covered by the safe
harbors created thereby. Those statements include, but may not be
limited to, all statements regarding intent, beliefs, expectations,
projections, forecasts, and plans of the Company and its management
and include statements in this press release regarding the
Company's positioning to generate enhanced profitability and
increased shareholder value in 2024 (Paragraph 2) and include
statements in this press release regarding the expectations of the
debt refinancing to generate interest savings of approximately $2.9
million for the remainder of 2024, offset by fees and amortization
associated with the retirement of the senior secured term loan
facility of approximately $2.6 million and the expectations of the
debt refinancing to generate a combined annualized savings of
approximately $4.4 million in 2025. These forward-looking
statements involve numerous risks and uncertainties, including,
without limitation, risks related to interest rate changes, the
amount of the Company's indebtedness, and the various risks
inherent in the Company’s business as set forth in periodic reports
filed with the Securities and Exchange Commission, including the
Company’s annual report on Form 10-K for the year ended December
31, 2023 (filed March 15, 2024). One or more of these factors have
affected historical results, and could in the future affect the
Company’s businesses and financial results in future periods and
could cause actual results to differ materially from plans and
projections. Therefore there can be no assurance that the
forward-looking statements included in this press release 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 or warranty by the Company or any other person that
the objectives and plans of the Company will be achieved. All
forward-looking statements made in this press release are based on
information presently available to the management of the Company.
The Company assumes no obligation to update any forward-looking
statements.
Rocky Brands, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(In thousands, except share
amounts)
(Unaudited)
March 31,
December 31,
March 31,
2024
2023
2023
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents
$
3,059
$
4,470
$
4,946
Trade receivables – net
70,662
77,028
73,650
Contract receivables
-
927
-
Other receivables
1,913
1,933
2,235
Inventories – net
165,129
169,201
224,124
Income tax receivable
538
1,253
-
Prepaid expenses
6,037
3,361
5,619
Total current assets
247,338
258,173
310,574
LEASED ASSETS
7,139
7,809
10,153
PROPERTY, PLANT & EQUIPMENT – net
51,305
51,976
54,666
GOODWILL
47,844
47,844
47,844
IDENTIFIED INTANGIBLES – net
111,919
112,618
114,716
OTHER ASSETS
982
965
1,028
TOTAL ASSETS
$
466,527
$
479,385
$
538,981
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable
$
53,479
$
49,840
$
66,783
Contract liabilities
-
927
-
Current portion of long-term debt
2,650
2,650
2,823
Accrued expenses:
Salaries and wages
1,774
1,204
1,816
Taxes – other
523
925
857
Accrued freight
2,193
2,284
2,098
Commissions
657
904
706
Accrued duty
5,867
5,440
6,642
Accrued interest
1,979
2,104
2,311
Income tax payable
-
-
1,052
Other
5,626
5,251
5,902
Total current liabilities
74,748
71,529
90,990
LONG-TERM DEBT
153,302
170,480
216,973
LONG-TERM TAXES PAYABLE
169
169
169
LONG-TERM LEASE
4,801
5,461
7,501
DEFERRED INCOME TAXES
7,475
7,475
8,006
DEFERRED LIABILITIES
737
716
1,053
TOTAL LIABILITIES
241,232
255,830
324,692
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and
outstanding March 31, 2024 - 7,417,546; December 31, 2023 -
7,412,480; March 31, 2023 - 7,346,650
72,312
71,973
70,107
Retained earnings
152,983
151,582
144,182
Total shareholders' equity
225,295
223,555
214,289
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
466,527
$
479,385
$
538,981
Rocky Brands, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(In thousands, except share
amounts)
(Unaudited)
Three Months Ended
March 31,
2024
2023
NET SALES
$
112,906
$
110,445
COST OF GOODS SOLD
68,757
66,686
GROSS MARGIN
44,149
43,759
OPERATING EXPENSES
36,166
39,604
INCOME FROM OPERATIONS
7,983
4,155
INTEREST EXPENSE AND OTHER – net
(4,654
)
(4,664
)
INCOME (LOSS) BEFORE INCOME TAX
EXPENSE
3,329
(509
)
INCOME TAX EXPENSE (BENEFIT)
779
(111
)
NET INCOME (LOSS)
$
2,550
$
(398
)
INCOME (LOSS) PER SHARE
Basic
$
0.34
$
(0.05
)
Diluted
$
0.34
$
(0.05
)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
Basic
7,417
7,346
Diluted
7,450
7,346
Rocky Brands, Inc. and
Subsidiaries
Reconciliation of GAAP
Measures to Non-GAAP Measures
(In thousands, except share
amounts)
(Unaudited)
Three Months Ended
March 31,
2024
2023
ADJUSTED GROSS MARGIN
$
44,149
$
43,759
OPERATING
EXPENSES
OPERATING EXPENSES, AS REPORTED
$
36,166
$
39,604
LESS: ACQUISITION-RELATED AMORTIZATION
(692
)
(764
)
ADJUSTED OPERATING EXPENSES
$
35,474
$
38,840
ADJUSTED OPERATING
INCOME
$
8,675
$
4,919
INTEREST EXPENSE AND OTHER – net , AS
REPORTED
$
(4,654
)
$
(4,664
)
LESS: GAIN ON SALE OF BUSINESS
-
(1,341
)
ADJUSTED INTEREST EXPENSE AND OTHER –
net
(4,654
)
(6,005
)
NET
INCOME
NET INCOME (LOSS), AS REPORTED
$
2,550
$
(398
)
TOTAL NON-GAAP ADJUSTMENTS
692
(577
)
TAX IMPACT OF ADJUSTMENTS
(162
)
126
ADJUSTED NET INCOME (LOSS)
$
3,080
$
(849
)
NET INCOME (LOSS) PER SHARE, AS
REPORTED
BASIC
$
0.34
$
(0.05
)
DILUTED
$
0.34
$
(0.05
)
ADJUSTED NET INCOME (LOSS) PER SHARE
BASIC
$
0.42
$
(0.12
)
DILUTED
$
0.41
$
(0.12
)
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC
7,417
7,346
DILUTED
7,450
7,346
Use of Non-GAAP Financial
Measures
In addition to GAAP financial measures, we present the following
non-GAAP financial measures: "non-GAAP adjusted operating
expenses," "non-GAAP adjusted operating income," "non-GAAP adjusted
interest expense and other income/(expense) - net," "non-GAAP
adjusted net income," and "non-GAAP adjusted net income per share."
Adjusted results exclude the impact of items that management
believes affect the comparability or underlying business trends in
our consolidated financial statements in the periods presented. We
believe that these non-GAAP measures are useful to management and
investors and other users of our consolidated financial statements
as an additional tool for evaluating operating performance. We
believe they also provide a useful baseline for analyzing trends in
our operations.
Investors should not consider these non-GAAP measures in
isolation from, or as a substitute for, financial information
prepared in accordance with GAAP. See "Reconciliation of GAAP
Measures to Non-GAAP Measures" accompanying this press release.
Non-GAAP
adjustment or
measure
Definition
Usefulness to management and
investors
Acquisition-
related
amortization
Amortization of acquisition-related
intangible assets consists of amortization of intangible assets
such as brands and customer relationships acquired in connection
with the acquisition of the performance and lifestyle footwear
business of Honeywell International Inc. Charges related to the
amortization of these intangibles are recorded in operating
expenses in our GAAP financial statements. Amortization charges are
recorded over the estimated useful life of the related acquired
intangible asset, and thus are generally recorded over multiple
years.
We excluded amortization charges for our
acquisition-related intangible assets for purposes of calculating
certain non-GAAP measures because these charges are inconsistent in
size and are significantly impacted by the valuation of our
acquisition. These adjustments facilitate a useful evaluation of
our current operating performance and comparison to past operating
performance and provide investors with additional means to evaluate
cost and expense trends.
Gain on sale of
business
Gain on sale of business relates to the
sale of the brand Servus. This includes the disposal of
non-financial assets and corresponding expenses relating to the
sale of the brand along with assets held at our Rock Island
manufacturing facility.
We excluded the disposition of
non-financial assets and related expenses for purposes of
calculating certain non-GAAP measures because the gain does not
accurately reflect our current operating performance and
comparisons to past operating results and provide investors with
additional means to evaluate cost trends.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240430763089/en/
Company Contact: Tom Robertson Chief Operating Officer, Chief
Financial Officer and Treasurer (740) 753-9100
Investor Relations: Brendon Frey ICR, Inc. (203) 682-8200
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