RCKY Rocky Brands Inc

Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial results for its third quarter ended September 30, 2024.

Third Quarter 2024 Overview

• Net sales decreased 8.8% to $114.6 million versus the year-ago quarter, or 2.4%, excluding certain non-recurring sales from the year-ago quarter

• Gross margin increased 110 basis points to 38.1% compared to 37.0% in the year-ago quarter

• Operating income was $10.1 million as compared to $14.3 million in the year-ago quarter

• Net income was $5.3 million, or $0.70 per diluted share, as compared to $6.8 million, or $0.93 per diluted share, for the year-ago quarter

• Adjusted net income was $5.8 million, or $0.77 per diluted share, as compared to $8.0 million, or $1.09 per diluted share, for the year-ago quarter

• Inventories at September 30, 2024 decreased 11.8% year-over-year

• Total debt at September 30, 2024 decreased 29.7% year-over-year

"While cautious consumer spending outside of peak shopping periods and warm, dry weather acted as headwinds this quarter, the underlying strength of our business remains intact," said Jason Brooks, Chairman, President and Chief Executive Officer. “The benefits of our multi-brand, multi-channel model were evident in the third quarter as double digit sales growth in both our Durango brand and our Lehigh CustomFit safety footwear platform partially offset Wholesale declines primarily within our work, outdoor and commercial military categories. Based on our current order book for 2025, we believe this softness is transitory and that recent brand and marketing investments, along with our improved capital structure, have the Company well positioned to drive sustainable, profitable growth and long-term shareholder value."

Third Quarter 2024 Review

Third quarter net sales decreased 8.8% to $114.6 million compared with $125.6 million in the third 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 decreased 2.4% year-over-year. Wholesale sales for the third quarter were $84.0 million, down 15.7% compared to the third quarter of 2023, or 9.7% excluding the aforementioned non-recurring sales. Retail sales for the third quarter increased 9.2%, or 11.8% excluding the non-recurring sales related to the change in the Canadian distribution model, to $26.8 million compared to the third quarter of 2023. Contract Manufacturing sales were $3.8 million in the third quarter of 2024 compared to $1.4 million in the prior year period, or up $3.4 million excluding the aforementioned non-recurring sales.

Gross margin in the third quarter of 2024 was $43.6 million, or 38.1% of net sales, compared to $46.5 million, or 37.0% 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 a higher mix of Retail segment sales which carry higher gross margins than the Wholesale and Contract Manufacturing segments.

Operating expenses were $33.6 million, or 29.3% of net sales, for the third quarter of 2024 compared to $32.3 million, or 25.7% of net sales, for the same period a year ago. Excluding $0.7 million of acquisition-related amortization in the third quarter of 2024 and $1.5 million of costs related to closure of a manufacturing facility, acquisition-related amortization, and restructuring costs in the third quarter of 2023, adjusted operating expenses were $32.9 million in the current year period and $30.7 million in the year-ago period. This increase was primarily attributable to incremental brand building and advertising programs to support future growth. As a percentage of net sales, adjusted operating expense were 28.7% in the third quarter 2024 compared with 24.5% in the year-ago period.

Income from operations for the third quarter of 2024 was $10.1 million, or 8.8% of net sales compared to $14.3 million or 11.4% of net sales for the same period a year ago. Adjusted operating income for the third quarter of 2024 was $10.8 million, or 9.4% of net sales compared to adjusted operating income of $15.8 million, or 12.6% of net sales a year ago.

Interest expense for the third quarter of 2024 was $3.3 million compared with $5.8 million a year ago. The decrease was driven by lower debt levels and interest rates as a result of the debt refinancing completed in April 2024.

The Company reported third quarter net income of $5.3 million, or $0.70 per diluted share compared to $6.8 million, or $0.93 per diluted share in the third quarter of 2023. Adjusted net income for the third quarter of 2024 was $5.8 million, or $0.77 per diluted share, compared to $8.0 million, or $1.09 per diluted share, in the year-ago period.

Balance Sheet Review

Cash and cash equivalents were $3.7 million at September 30, 2024 compared to $4.2 million on the same date a year ago.

Inventories at September 30, 2024 were $171.8 million, down 11.8% from $194.7 million on the same date a year ago.

Total debt, net of unamortized debt issuance costs of $2.4 million, at September 30, 2024 was $150.3 million consisting of a $47.2 million senior term loan and $105.5 million of borrowings under the Company's revolving credit facility. Compared with September 30, 2023 and December 31, 2023, total debt at September 30, 2024 was down 29.7% and 13.2%, respectively.

Conference Call Information

The Company's conference call to review third quarter 2024 results will be broadcast live over the internet today, Wednesday, October 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 softness in consumer spending being transitory (Paragraph 2) and that recent brand and marketing investments along with an improved capital structure have the Company well positioned to drive sustainable, profitable growth and long-term 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 reports on Form 10-Q for the quarters ended March 31, 2024 (filed May 9, 2024) and June 30, 2024 (filed August 8, 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)

 

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

 

2024

 

 

2023

 

 

2023

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,705

 

 

$

4,470

 

 

$

4,240

 

Trade receivables – net

 

 

77,130

 

 

 

77,028

 

 

 

97,844

 

Contract receivables

 

 

-

 

 

 

927

 

 

 

2,990

 

Other receivables

 

 

177

 

 

 

1,933

 

 

 

2,207

 

Inventories – net

 

 

171,847

 

 

 

169,201

 

 

 

194,734

 

Income tax receivable

 

 

-

 

 

 

1,253

 

 

 

2,445

 

Prepaid expenses

 

 

5,205

 

 

 

3,361

 

 

 

4,985

 

Total current assets

 

 

258,064

 

 

 

258,173

 

 

 

309,445

 

LEASED ASSETS

 

 

6,705

 

 

 

7,809

 

 

 

7,982

 

PROPERTY, PLANT & EQUIPMENT – net

 

 

50,380

 

 

 

51,976

 

 

 

53,124

 

GOODWILL

 

 

47,844

 

 

 

47,844

 

 

 

47,844

 

IDENTIFIED INTANGIBLES – net

 

 

110,521

 

 

 

112,618

 

 

 

113,321

 

OTHER ASSETS

 

 

1,503

 

 

 

965

 

 

 

1,015

 

TOTAL ASSETS

 

$

475,017

 

 

$

479,385

 

 

$

532,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

63,148

 

 

$

49,840

 

 

$

62,733

 

Contract liabilities

 

 

-

 

 

 

927

 

 

 

2,990

 

Current portion of long-term debt

 

 

8,361

 

 

 

2,650

 

 

 

2,704

 

Accrued expenses and other liabilities

 

 

20,845

 

 

 

18,112

 

 

 

21,275

 

Total current liabilities

 

 

92,354

 

 

 

71,529

 

 

 

89,702

 

LONG-TERM DEBT

 

 

141,929

 

 

 

170,480

 

 

 

211,190

 

LONG-TERM TAXES PAYABLE

 

 

-

 

 

 

169

 

 

 

169

 

LONG-TERM LEASE

 

 

4,232

 

 

 

5,461

 

 

 

5,715

 

DEFERRED INCOME TAXES

 

 

7,475

 

 

 

7,475

 

 

 

8,006

 

DEFERRED LIABILITIES

 

 

777

 

 

 

716

 

 

 

1,179

 

TOTAL LIABILITIES

 

 

246,767

 

 

 

255,830

 

 

 

315,961

 

SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, no par value;

 

 

 

 

 

 

 

 

 

 

 

 

25,000,000 shares authorized; issued and outstanding September 30, 2024 - 7,449,020; December 31, 2023 - 7,412,480; September 30, 2023 - 7,366,201

 

 

73,537

 

 

 

71,973

 

 

 

70,757

 

Retained earnings

 

 

154,713

 

 

 

151,582

 

 

 

146,013

 

Total shareholders' equity

 

 

228,250

 

 

 

223,555

 

 

 

216,770

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

475,017

 

 

$

479,385

 

 

$

532,731

 

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

NET SALES

 

$

114,554

 

 

$

125,614

 

 

$

325,718

 

 

$

335,881

 

COST OF GOODS SOLD

 

 

70,908

 

 

 

79,076

 

 

 

199,886

 

 

 

208,012

 

GROSS MARGIN

 

 

43,646

 

 

 

46,538

 

 

 

125,832

 

 

 

127,869

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

33,575

 

 

 

32,259

 

 

 

103,271

 

 

 

107,233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

 

10,071

 

 

 

14,279

 

 

 

22,561

 

 

 

20,636

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE AND OTHER – net

 

 

(3,180

)

 

 

(5,649

)

 

 

(13,964

)

 

 

(15,943

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAX EXPENSE

 

 

6,891

 

 

 

8,630

 

 

 

8,597

 

 

 

4,693

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX EXPENSE

 

 

1,612

 

 

 

1,803

 

 

 

2,011

 

 

 

980

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

5,279

 

 

$

6,827

 

 

$

6,586

 

 

$

3,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.71

 

 

$

0.93

 

 

$

0.89

 

 

$

0.50

 

Diluted

 

$

0.70

 

 

$

0.93

 

 

$

0.88

 

 

$

0.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

7,449

 

 

 

7,366

 

 

 

7,432

 

 

 

7,355

 

Diluted

 

 

7,503

 

 

 

7,375

 

 

 

7,479

 

 

 

7,374

 

Rocky Brands, Inc. and Subsidiaries

Reconciliation of GAAP Measures to Non-GAAP Measures

(In thousands, except share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES, AS REPORTED

 

$

114,554

 

 

$

125,614

 

 

$

325,718

 

 

$

335,881

 

ADD: RETURNS RELATING TO SUPPLIER DISPUTE

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,542

 

ADJUSTED NET SALES

 

$

114,554

 

 

$

125,614

 

 

$

325,718

 

 

$

337,423

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF GOODS SOLD

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF GOODS SOLD, AS REPORTED

 

$

70,908

 

 

$

79,076

 

 

$

199,886

 

 

$

208,012

 

LESS: SUPPLIER DISPUTE INVENTORY ADJUSTMENT

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(181

)

ADJUSTED COST OF GOODS SOLD

 

$

70,908

 

 

$

79,076

 

 

$

199,886

 

 

$

207,831

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS MARGIN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS MARGIN, AS REPORTED

 

$

43,646

 

 

$

46,538

 

 

$

125,832

 

 

$

127,869

 

ADJUSTED GROSS MARGIN

 

$

43,646

 

 

$

46,538

 

 

$

125,832

 

 

$

129,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES, AS REPORTED

 

$

33,575

 

 

$

32,259

 

 

$

103,271

 

 

$

107,233

 

LESS: ACQUISITION-RELATED AMORTIZATION

 

 

(692

)

 

 

(692

)

 

 

(2,076

)

 

 

(2,148

)

LESS: CLOSURE OF MANUFACTURING FACILITY

 

 

-

 

 

 

(398

)

 

 

-

 

 

 

(398

)

LESS: RESTRUCTURING COSTS

 

 

-

 

 

 

(453

)

 

 

-

 

 

 

(1,486

)

ADJUSTED OPERATING EXPENSES

 

$

32,883

 

 

$

30,716

 

 

$

101,195

 

 

$

103,201

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADJUSTED OPERATING INCOME

 

$

10,763

 

 

$

15,822

 

 

$

24,637

 

 

$

26,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE AND OTHER – net, AS REPORTED

 

$

(3,180

)

 

$

(5,649

)

 

$

(13,964

)

 

$

(15,943

)

ADD: TERM LOAN FACILITY EXTINGUISHMENT COSTS

 

 

-

 

 

 

-

 

 

 

2,597

 

 

 

-

 

LESS: GAIN ON SALE OF BUSINESS

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,341

)

ADJUSTED INTEREST EXPENSE AND OTHER – net

 

 

(3,180

)

 

 

(5,649

)

 

 

(11,367

)

 

 

(17,284

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME, AS REPORTED

 

$

5,279

 

 

$

6,827

 

 

$

6,586

 

 

$

3,713

 

TOTAL NON-GAAP ADJUSTMENTS

 

 

692

 

 

 

1,543

 

 

 

4,673

 

 

 

4,414

 

TAX IMPACT OF ADJUSTMENTS

 

 

(162

)

 

 

(322

)

 

 

(1,093

)

 

 

(922

)

ADJUSTED NET INCOME

 

$

5,809

 

 

$

8,048

 

 

$

10,166

 

 

$

7,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME PER SHARE, AS REPORTED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

$

0.71

 

 

$

0.93

 

 

$

0.89

 

 

$

0.50

 

DILUTED

 

$

0.70

 

 

$

0.93

 

 

$

0.88

 

 

$

0.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADJUSTED NET INCOME PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

$

0.78

 

 

$

1.09

 

 

$

1.37

 

 

$

0.98

 

DILUTED

 

$

0.77

 

 

$

1.09

 

 

$

1.36

 

 

$

0.98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

 

7,449

 

 

 

7,366

 

 

 

7,432

 

 

 

7,355

 

DILUTED

 

 

7,503

 

 

 

7,375

 

 

 

7,479

 

 

 

7,374

 

Use of Non-GAAP Financial Measures

In addition to GAAP financial measures, we present the following non-GAAP financial measures: "non-GAAP adjusted net sales," "non-GAAP adjusted costs of goods sold," "non-GAAP adjusted gross margin," "non-GAAP adjusted operating expenses," "non-GAAP adjusted operating income," "non-GAAP adjusted interest expense and other - 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 were unique to a resolved 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 was unique to a resolved 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.

Closure of Manufacturing Facility

Closure of manufacturing facility relates to the expenses and overhead incurred associated with closing our Rock Island manufacturing facility.

We excluded costs associated with the closure of our manufacturing facility for purposes of calculating non-GAAP measures because these costs did not reflect our current operating performance. These adjustments facilitated a useful evaluation of our current operating performance and comparison to past operating results and provided investors with additional means to evaluate 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 these costs 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.

 

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Company Contact: Tom Robertson Chief Operating Officer, Chief Financial Officer and Treasurer (740) 753-9100 Investor Relations: Brendon Frey ICR, Inc. (203) 682-8200