Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial
results for its second quarter ended June 30, 2023.
Second Quarter 2023
Overview
- Net sales decreased 38.4% to $99.8 million, or $101.4 million
on an adjusted basis
- Wholesale segment sales decreased 45.5%
- Retail segment revenue decreased 3.6%
- Gross margin as a percentage of net sales increased 440 basis
points to 37.6%
- Operating income was $2.2 million, or $5.7 million on an
adjusted basis
- Net loss was $2.7 million, or $0.37 per diluted share
- Inventories decreased 24.1% year-over-year
- Total debt at June 30, 2023 was down 22.1% compared with June
30, 2022
Jason Brooks, Chairman, President and Chief Executive Officer,
said “For the second quarter in a row, our sell-through performance
at several of our major wholesale accounts outpaced sell-in as
retailers continue to work on aligning overall inventory levels
with the current market environment. Consumer response to our brand
portfolio remains solid with strong full price selling and recent
price increases helping drive a 440-basis point improvement in
gross margin. While our year-to-date results were more challenging
than anticipated due in part to ongoing industry headwinds, we
believe our business is positioned for improvement over the
remainder of 2023 based on consumer demand for our products, our
current order book and recent conversations with key wholesale
partners about their plans for the second half of the year."
Second Quarter 2023
Review
Second quarter net sales decreased 38.4% to $99.8 million
compared with $162.0 million in the second quarter of 2022.
Wholesale segment sales for the second quarter decreased 45.5% to
$71.5 million compared to $131.2 million for the same period in
2022. Retail segment sales for the second quarter decreased 3.6% to
$25.1 million compared to $26.0 million for the same period last
year. Contract Manufacturing segment sales, which include contract
military sales and private label programs, were $3.3 million in the
second quarter of 2023 compared to $4.9 million in the prior year
period. The decrease in Contract Manufacturing segment sales was
due to the expiration of certain contracts with the U.S. Military.
Adjusted net sales, excluding returns associated with a supplier
related dispute, decreased 37.4% to $101.4 million from the same
period a year ago.
Gross margin in the second quarter of 2023 was $37.6 million, or
37.6% of net sales, compared to $53.8 million, or 33.2% of net
sales, for the same period last year. The 440-basis point increase
in gross margin as a percentage of net sales was driven by higher
Wholesale segment gross margins from the realization of pricing
actions taken in the second half of 2022, as well as decreases in
in-bound logistics costs, and a higher mix of Retail segment sales
which carry higher gross margins than the Wholesale and Contract
Manufacturing segments.
Operating expenses were $35.4 million, or 35.4% of net sales,
for the second quarter of 2023 compared to $48.2 million, or 29.7%
of net sales, for the same period a year ago. Adjusted operating
expenses were $33.6 million in the current year period after
excluding $1.7 million of acquisition related amortization and
restructuring costs in the second quarter of 2023. Adjusted
operating expenses were $46.0 million in the year ago period after
excluding $2.1 million of acquisition related amortization,
integration expenses and restructuring costs in the second quarter
of 2022. The decrease in operating expenses was driven primarily by
a decrease in variable expenses associated with lower sales and
improved distribution center efficiencies compared with the year
ago period. As a percentage of adjusted net sales, adjusted
operating expenses were 33.2% in the second quarter of 2023
compared with 28.4% in the year ago period.
Income from operations for the second quarter of 2023 was $2.2
million, or 2.2% of net sales compared to $5.6 million or 3.5% of
net sales for the same period a year ago. Adjusted operating income
for the second quarter of 2023 was $5.7 million, or 5.6% of
adjusted net sales compared to adjusted operating income of $7.7
million, or 4.8% of net sales a year ago.
Interest expense for the second quarter of 2023 was $5.6 million
compared with $4.3 million a year ago. The increase reflected
increased interest rates on the senior term loan and credit
facility.
The Company reported a second quarter 2023 net loss of $2.7
million, or $0.37 per diluted share compared to net income of $0.9
million, or $0.12 per diluted share in the second quarter of 2022.
Adjusted net income for the second quarter of 2023 was $0.0
million, or $0.00 per diluted share, compared to adjusted net
income of $2.5 million, or $0.34 per diluted share in the year ago
period.
Balance Sheet Review
Cash and cash equivalents were $3.1 million at June 30, 2023
compared to $5.8 million on the same date a year ago.
Total debt at June 30, 2023 was $221.7 million consisting of
$91.1 million senior term loan and $133.0 million of borrowings
under the Company's senior secured asset-backed credit facility.
Compared with June 30, 2022 and December 31, 2022, total debt at
June 30, 2023 was down 22.1% and 13.7%, respectively.
Inventories at June 30, 2023 were $218.3 million, down 24.1%
compared to $287.8 million on the same date a year ago and down
7.3% compared with $235.4 million at December 31, 2022.
Conference Call
Information
The Company's conference call to review second quarter 2023
results will be broadcast live over the internet today, Tuesday,
August 1, 2023 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 retailers’
ongoing alignment of overall inventory levels with the current
market environment (Paragraph 2), and the positioning of the
Company’s business for improvement over the remainder of 2023
(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, 2022 (filed March 10, 2023) and the quarterly
report on Form 10-Q for the quarter ended March 31, 2023 (filed May
10, 2023). 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,
2023
2022
2022
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents
$
3,082
$
5,719
$
5,802
Trade receivables – net
72,566
94,953
115,794
Contract receivables
2,990
-
-
Other receivables
2,225
908
224
Inventories – net
218,327
235,400
287,817
Income tax receivable
3,494
-
6,360
Prepaid expenses
5,522
4,067
5,216
Total current assets
308,206
341,047
421,213
LEASED ASSETS
9,362
11,014
10,376
PROPERTY, PLANT & EQUIPMENT – net
54,032
57,359
61,352
GOODWILL
47,844
50,246
50,246
IDENTIFIED INTANGIBLES – net
114,019
121,782
124,740
OTHER ASSETS
1,049
942
911
TOTAL ASSETS
$
534,512
$
582,390
$
668,838
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable
$
61,225
$
69,686
$
130,246
Contract liabilities
2,990
-
-
Current Portion of Long-Term Debt
4,625
3,250
3,250
Accrued expenses:
Salaries and wages
2,791
1,253
4,869
Taxes – other
922
1,325
1,674
Accrued freight
2,491
2,413
2,290
Commissions
844
1,934
1,428
Accrued duty
6,377
6,764
12,144
Accrued interest
2,345
2,822
2,705
Income tax payable
-
1,172
-
Other
5,756
5,675
5,693
Total current liabilities
90,366
96,294
164,299
LONG-TERM DEBT
217,114
253,646
281,365
LONG-TERM TAXES PAYABLE
169
169
169
LONG-TERM LEASE
6,804
8,216
7,636
DEFERRED INCOME TAXES
8,006
8,006
10,293
DEFERRED LIABILITIES
1,325
586
609
TOTAL LIABILITIES
323,784
366,917
464,371
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and
outstanding June 30, 2023 - 7,354,060; December 31, 2022 -
7,339,011; June 30, 2022 - 7,313,075
70,400
69,752
68,680
Retained earnings
140,328
145,721
135,787
Total shareholders' equity
210,728
215,473
204,467
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
534,512
$
582,390
$
668,838
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,
2023
2022
2023
2022
NET SALES
$
99,822
$
162,039
$
210,267
$
329,063
COST OF GOODS SOLD
62,250
108,288
128,936
212,486
GROSS MARGIN
37,572
53,751
81,331
116,577
OPERATING EXPENSES
35,370
48,155
74,974
97,785
INCOME FROM OPERATIONS
2,202
5,596
6,357
18,792
INTEREST EXPENSE AND OTHER INCOME/EXPENSE
– net
(5,630
)
(4,323
)
(10,294
)
(8,230
)
(LOSS) INCOME BEFORE INCOME TAX
EXPENSE
(3,428
)
1,273
(3,937
)
10,562
INCOME TAX (BENEFIT) EXPENSE
(713
)
353
(823
)
2,304
NET (LOSS) INCOME
$
(2,715
)
$
920
$
(3,114
)
$
8,258
(LOSS) INCOME PER SHARE
Basic
$
(0.37
)
$
0.13
$
(0.42
)
$
1.13
Diluted
$
(0.37
)
$
0.12
$
(0.42
)
$
1.12
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
Basic
7,354
7,313
7,350
7,310
Diluted
7,354
7,389
7,350
7,400
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,
2023
2022
2023
2022
NET SALES
NET SALES, AS REPORTED
$
99,822
$
162,039
$
210,267
$
329,063
ADD: RETURNS RELATING TO SUPPLIER
DISPUTE
1,542
-
1,542
-
ADJUSTED NET SALES
$
101,364
$
162,039
$
211,809
$
329,063
COST OF GOODS
SOLD
COST OF GOODS SOLD, AS REPORTED
$
62,250
$
108,288
$
128,936
$
212,486
LESS: SUPPLIER DISPUTE INVENTORY
ADJUSTMENT
(181
)
-
(181
)
$
-
ADJUSTED COST OF GOODS SOLD
$
62,069
$
108,288
$
128,755
$
212,486
GROSS
MARGIN
GROSS MARGIN, AS REPORTED
$
37,572
$
53,751
$
81,331
$
116,577
ADJUSTED GROSS MARGIN
$
39,295
$
53,751
$
83,054
$
116,577
OPERATING
EXPENSES
OPERATING EXPENSES, AS REPORTED
$
35,370
$
48,155
$
74,974
$
97,785
LESS: ACQUISITION-RELATED AMORTIZATION
(692
)
(782
)
(1,456
)
(1,564
)
LESS: ACQUISITION-RELATED INTEGRATION
EXPENSES
-
(132
)
-
(397
)
LESS: RESTRUCTURING COSTS
(1,034
)
(1,201
)
(1,034
)
(1,201
)
ADJUSTED OPERATING EXPENSES
$
33,644
$
46,040
$
72,484
$
94,623
ADJUSTED OPERATING
INCOME
$
5,651
$
7,711
$
10,570
$
21,954
INTEREST EXPENSE AND
OTHER INCOME – net
INTEREST EXPENSE AND OTHER INCOME, AS
REPORTED
$
(5,630
)
$
(4,323
)
$
(10,294
)
$
(8,230
)
LESS: GAIN ON SALE OF BUSINESS
-
-
(1,341
)
-
ADJUSTED INTEREST EXPENSE AND OTHER
INCOME/EXPENSE – net
(5,630
)
(4,323
)
(11,635
)
(8,230
)
NET (LOSS)
INCOME
NET (LOSS) INCOME, AS REPORTED
$
(2,715
)
$
920
$
(3,114
)
$
8,258
TOTAL NON-GAAP ADJUSTMENTS
3,449
2,115
2,872
3,162
TAX IMPACT OF ADJUSTMENTS
(717
)
(487
)
(600
)
(690
)
ADJUSTED NET INCOME (LOSS)
$
17
$
2,548
$
(842
)
$
10,730
NET (LOSS) INCOME PER SHARE, AS
REPORTED
BASIC
$
(0.37
)
$
0.13
$
(0.42
)
$
1.13
DILUTED
$
(0.37
)
$
0.12
$
(0.42
)
$
1.12
ADJUSTED NET INCOME (LOSS) PER SHARE
BASIC
$
-
$
0.35
$
(0.11
)
$
1.47
DILUTED
$
-
$
0.34
$
(0.11
)
$
1.45
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC
7,354
7,313
7,350
7,310
DILUTED
7,354
7,389
7,350
7,400
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 net cost of goods sold," "non-GAAP adjusted
operating expenses," "non-GAAP adjusted operating income,"
"non-GAAP adjusted interest and other income," "non-GAAP adjusted
net (loss) income," and "non-GAAP adjusted net (loss) 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 on 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 the 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 the 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.
Acquisition-related integration
expenses
Acquisition-related integration expenses
are expenses including investment banking fees, legal fees,
transaction fees, integration costs and consulting fees tied to the
acquisition of the performance and lifestyle footwear business of
Honeywell International Inc.
We excluded acquisition-related expenses
for purposes of calculating certain non-GAAP measures because the
charges do not accurately reflect our current operating performance
and comparisons to past operating results and provide investors
with additional means to evaluate cost 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.
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/20230801149875/en/
Company Contact: Tom Robertson Chief Operating Officer (740)
753-9100 Investor Relations: Brendon Frey ICR, Inc. (203)
682-8200
Grafico Azioni Rocky Brands (NASDAQ:RCKY)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni Rocky Brands (NASDAQ:RCKY)
Storico
Da Giu 2023 a Giu 2024