Net Sales of $98.3 Million; Net Loss Per
Share of $0.17; Adjusted Net Income Per Share of $0.17
Inventories Decreased 20.0% and Total Debt
Decreased 31.3% Year-Over-Year
Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial
results for its second quarter ended June 30, 2024.
Second Quarter 2024
Overview
- Net sales decreased 1.6% to $98.3 million from the year ago
quarter, or increased 6.1%, excluding certain non-recurring sales
from the year ago quarter
- Operating income increased 104.7% to $4.5 million from the year
ago quarter
- Net loss was $1.2 million, or $0.17 per diluted share as
compared to a net loss of $2.7 million or $0.37 per diluted share
for the year ago quarter
- Adjusted net income was $1.3 million, or $0.17 per diluted
share, as compared to $0.0 million or $0.00 per diluted share for
the year ago quarter
- Inventories at June 30, 2024 decreased 20.0%
year-over-year
- Total debt at June 30, 2024 decreased 31.3% year-over-year
Jason Brooks, Chairman, President and Chief Executive Officer,
commented, “We continue to effectively navigate an unpredictable
consumer environment thanks to our diversified brand portfolio and
recently deployed cost saving initiatives. Strong double-digit
gains in sales for our Durango and XTRATUF brands in both our
wholesale and e-commerce channels helped offset softness in other
areas of our business and generated low-single digit year-over-year
recurring sales growth. The second quarter was also highlighted by
the refinancing of our debt and simplification of our capital
structure which is expected to generate approximately $4.4 million
in annualized savings beginning in 2025. Over the past several
years, we have taken actions to improve the Company’s financial
profile in order to reinvest in growth and drive increased
shareholder value. We are encouraged with our recent results and
look forward to delivering further growth over the near and
long-term.”
Second Quarter 2024
Review
Second quarter net sales decreased 1.6% to $98.3 million
compared with $99.8 million in the second quarter of 2023.
Excluding certain non-recurring sales relating to the manufacturing
of Servus product following the divestiture of the Servus brand,
the change to a distributor model in Canada in November 2023, and
temporarily elevated commercial military footwear sales to a single
customer throughout 2023, net sales increased 6.1% in the second
quarter of 2024 compared to the year ago period. Wholesale sales
for the second quarter were $68.3 million, down 4.5% compared to
the second quarter of 2023, or up 2.3% excluding the aforementioned
non-recurring sales. Retail sales for the second quarter increased
4.1%, or 6.1% excluding the non-recurring sales related to the
change in the Canada distribution model, to $26.1 million compared
to the second quarter of 2023. Contract Manufacturing sales, which
include contract military sales and private label programs, were
$3.9 million in the second quarter of 2024 compared to $3.3 million
in the prior year period, or up $2.6 million excluding the
aforementioned non-recurring sales.
Gross margin in the second quarter of 2024 was $38.0 million, or
38.7% of net sales, compared to $37.6 million, or 37.6% of net
sales, for the same period last year. The 110-basis point increase
in gross margin as a percentage of net sales was due to an increase
of 200-basis points in Wholesale gross margins as well as a higher
percentage of Retail net sales, which carry higher gross margins
than our Wholesale and Contract Manufacturing segments.
Operating expenses were $33.5 million, or 34.1% of net sales,
for the second quarter of 2024 compared to $35.4 million, or 35.4%
of net sales, for the same period a year ago. Excluding $0.7
million of acquisition-related amortization in the second quarter
of 2024 and $1.7 million of acquisition-related amortization and
restructuring costs in the second quarter of 2023, adjusted
operating expenses were $32.8 million, or 33.4%, in the current
year period and $33.6 million, or 33.2%, in the year ago
period.
Income from operations for the second quarter of 2024 was $4.5
million, or 4.6% of net sales, compared to $2.2 million, or 2.2% of
net sales, for the same period a year ago. Adjusted operating
income for the second quarter of 2024 was $5.2 million, or 5.3% of
net sales, compared to adjusted operating income of $5.7 million,
or 5.6% of net sales, a year ago.
Interest expense for the second quarter of 2024 was $6.1
million, inclusive of a $2.6 million one-time term loan
extinguishment charge, compared with $5.6 million a year ago.
Excluding the one-time term loan extinguishment charge, interest
expense for the second quarter was $3.5 million. The $2.1 million
decrease was driven by lower debt levels and lower interest rates
as a result of the debt refinancing completed in April 2024.
The Company reported a second quarter net loss of $1.2 million,
or $0.17 per diluted share, compared to a net loss of $2.7 million,
or $0.37 per diluted share, in the second quarter of 2023. Adjusted
net income for the second quarter of 2024 was $1.3 million, or
$0.17 per diluted share, compared to $0.0 million, or $0.00 per
diluted share, in the year ago period.
Balance Sheet Review
Cash and cash equivalents were $4.1 million at June 30, 2024
compared to $3.1 million on the same date a year ago.
Inventories at June 30, 2024 were $175.0 million, down 20.0%
compared to $218.3 million on the same date a year ago.
Total debt, net of unamortized debt issuance costs, at June 30,
2024 was $152.4 million consisting of a $49.3 million senior term
loan and $105.7 million of borrowings under the Company's $175.0
million revolving credit facility with Bank of America, N.A.
Compared with June 30, 2023 and December 31, 2023, total debt at
June 30, 2024 was down 31.3% and 12.0%, respectively.
Conference Call
Information
The Company's conference call to review second quarter 2024
results will be broadcast live over the internet today, Tuesday,
July 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 ability to effectively navigate changes in the consumer
environment (Paragraph 2), anticipated annualized savings beginning
in 2025 as a result of the Company's recent debt refinancing and
simplified capital structure (Paragraph 2) and the Company's
actions to improve its financial profile in order to reinvest in
growth and to drive increased shareholder value (Paragraph 2).
These forward-looking statements involve numerous risks and
uncertainties, including, without limitation, 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) and the quarterly report on Form
10-Q for the quarter ended March 31, 2024 (filed May 9, 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)
June 30,
December 31,
June 30,
2024
2023
2023
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents
$
4,107
$
4,470
$
3,082
Trade receivables – net
62,968
77,028
72,566
Contract receivables
-
927
2,990
Other receivables
427
1,933
2,225
Inventories – net
174,973
169,201
218,327
Income tax receivable
1,025
1,253
3,494
Prepaid expenses
5,659
3,361
5,522
Total current assets
249,159
258,173
308,206
LEASED ASSETS
7,367
7,809
9,362
PROPERTY, PLANT & EQUIPMENT – net
51,296
51,976
54,032
GOODWILL
47,844
47,844
47,844
IDENTIFIED INTANGIBLES – net
111,220
112,618
114,019
OTHER ASSETS
988
965
1,049
TOTAL ASSETS
$
467,874
$
479,385
$
534,512
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable
$
57,824
$
49,840
$
61,225
Contract liabilities
-
927
2,990
Current portion of long-term debt
8,361
2,650
4,625
Accrued expenses and other liabilities
20,663
18,112
21,526
Total current liabilities
86,848
71,529
90,366
LONG-TERM DEBT
144,073
170,480
217,114
LONG-TERM TAXES PAYABLE
-
169
169
LONG-TERM LEASE
4,914
5,461
6,804
DEFERRED INCOME TAXES
7,475
7,475
8,006
DEFERRED LIABILITIES
752
716
1,325
TOTAL LIABILITIES
244,062
255,830
323,784
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and
outstanding June 30, 2024 - 7,444,881; December 31, 2023 -
7,412,480; June 30, 2023 - 7,354,060
73,223
71,973
70,400
Retained earnings
150,589
151,582
140,328
Total shareholders' equity
223,812
223,555
210,728
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
467,874
$
479,385
$
534,512
Rocky Brands, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(In thousands, except share
amounts)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2024
2023
2024
2023
NET SALES
$
98,258
$
99,822
$
211,164
$
210,267
COST OF GOODS SOLD
60,220
62,250
128,977
128,936
GROSS MARGIN
38,038
37,572
82,187
81,331
OPERATING EXPENSES
33,530
35,370
69,695
74,974
INCOME FROM OPERATIONS
4,508
2,202
12,492
6,357
INTEREST EXPENSE AND OTHER – net
(6,131
)
(5,630
)
(10,785
)
(10,294
)
(LOSS) INCOME BEFORE INCOME TAX
EXPENSE
(1,623
)
(3,428
)
1,707
(3,937
)
INCOME TAX (BENEFIT) EXPENSE
(380
)
(713
)
399
(823
)
NET (LOSS) INCOME
$
(1,243
)
$
(2,715
)
$
1,308
$
(3,114
)
(LOSS) INCOME PER SHARE
Basic
$
(0.17
)
$
(0.37
)
$
0.18
$
(0.42
)
Diluted
$
(0.17
)
$
(0.37
)
$
0.18
$
(0.42
)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
Basic
7,429
7,354
7,423
7,350
Diluted
7,429
7,354
7,466
7,350
Rocky Brands, Inc. and
Subsidiaries
Reconciliation of GAAP
Measures to Non-GAAP Measures
(In thousands, except share
amounts)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2024
2023
2024
2023
NET SALES
NET SALES, AS REPORTED
$
98,258
$
99,822
$
211,164
$
210,267
ADD: RETURNS RELATING TO SUPPLIER
DISPUTE
-
1,542
-
1,542
ADJUSTED NET SALES
$
98,258
$
101,364
$
211,164
$
211,809
COST OF GOODS
SOLD
COST OF GOODS SOLD, AS REPORTED
$
60,220
$
62,250
$
128,977
$
128,936
LESS: SUPPLIER DISPUTE INVENTORY
ADJUSTMENT
-
(181
)
-
(181
)
ADJUSTED COST OF GOODS SOLD
$
60,220
$
62,069
$
128,977
$
128,755
GROSS
MARGIN
GROSS MARGIN, AS REPORTED
$
38,038
$
37,572
$
82,187
$
81,331
ADJUSTED GROSS MARGIN
$
38,038
$
39,295
$
82,187
$
83,054
OPERATING
EXPENSES
OPERATING EXPENSES, AS REPORTED
$
33,530
$
35,370
$
69,695
$
74,974
LESS: ACQUISITION-RELATED AMORTIZATION
(692
)
(692
)
(1,384
)
(1,456
)
LESS: RESTRUCTURING COSTS
-
(1,034
)
-
(1,034
)
ADJUSTED OPERATING EXPENSES
$
32,838
$
33,644
$
68,311
$
72,484
ADJUSTED OPERATING
INCOME
$
5,200
$
5,651
$
13,876
$
10,570
INTEREST EXPENSE AND OTHER – net, AS
REPORTED
$
(6,131
)
$
(5,630
)
$
(10,785
)
$
(10,294
)
ADD: TERM LOAN FACILITY EXTINGUISHMENT
COSTS
2,597
-
2,597
-
LESS: GAIN ON SALE OF BUSINESS
-
-
-
(1,341
)
ADJUSTED INTEREST EXPENSE AND OTHER –
net
(3,534
)
(5,630
)
(8,188
)
(11,635
)
NET
INCOME
NET (LOSS) INCOME, AS REPORTED
$
(1,243
)
$
(2,715
)
$
1,308
$
(3,114
)
TOTAL NON-GAAP ADJUSTMENTS
3,289
3,449
3,981
2,872
TAX IMPACT OF ADJUSTMENTS
(770
)
(717
)
(931
)
(600
)
ADJUSTED NET INCOME (LOSS)
$
1,276
$
17
$
4,358
$
(842
)
NET (LOSS) INCOME PER SHARE, AS
REPORTED
BASIC
$
(0.17
)
$
(0.37
)
$
0.18
$
(0.42
)
DILUTED
$
(0.17
)
$
(0.37
)
$
0.18
$
(0.42
)
ADJUSTED NET INCOME (LOSS) PER SHARE
BASIC
$
0.17
$
-
$
0.59
$
(0.11
)
DILUTED
$
0.17
$
-
$
0.58
$
(0.11
)
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC
7,429
7,354
7,423
7,350
DILUTED
7,429
7,354
7,466
7,350
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
Returns relating to supplier dispute
Returns relating to supplier dispute
consist of returns of product produced by a manufacturing
supplier.
We excluded these returns for calculating
certain non-GAAP measures because these returns are inconsistent in
size with our normal course of business and are unique to the
on-going dispute with a manufacturing supplier. 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 net sales trends.
Supplier dispute inventory adjustment
Supplier dispute inventory adjustment
consists of an inventory adjustment to cost of goods sold for
product produced by a manufacturing supplier.
We excluded this inventory adjustment to
cost of goods sold for calculating certain non-GAAP measures
because this adjustment is noncustomary and is unique to the
on-going dispute with a manufacturing supplier. This adjustment
facilitates a useful evaluation of our current operating
performance and comparison to past operating performance and
provides investors with additional means to evaluate net cost of
goods sold trends.
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.
Restructuring Costs
Restructuring costs represent severance
expenses associated with headcount reductions following the
integration of the acquired performance and lifestyle footwear
business of Honeywell International Inc. in 2022 and the sale of
Servus in 2023.
We excluded restructuring costs for
purposes of calculating non-GAAP measures because these costs do
not reflect our current operating performance. These adjustments
facilitate a useful evaluation of our current operations
performance and comparisons to past operating results and provide
investors with additional means to evaluate expense trends.
Term debt extinguishment costs
Term debt extinguishment costs relate to
the loss incurred on the extinguishment of debt during the second
quarter 2024. The prepayment penalty associated with the early
termination of the term debt, as well as the accelerated
amortization of deferred financing fees of the term debt, was
recorded as expense within Interest Expense and Other - net
accompanying unaudited condensed consolidated financial
statements.
We excluded this cost for purposes of
calculating non-GAAP measures because these costs do not reflect
our current operating performance. This adjustment is a one-time
cost for refinancing the term debt and is not reoccurring. This
adjustment facilitates a useful evaluation of our current
operations performance and comparisons to past operating results
and provide investors with additional means to evaluate 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/20240730790533/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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