Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Rocky Brands, Inc. Announces Third Quarter 2023 Results By: Rocky Brands, Inc. via Business Wire November 01, 2023 at 16:05 PM EDT Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial results for its third quarter ended September 30, 2023. Third Quarter 2023 Overview Net sales were $125.6 million, a decrease of 14.8% (or 12.7% on an adjusted basis) Wholesale segment sales decreased 17.4% (or 14.9% on an adjusted basis) Retail segment sales increased 4.7% Gross margin as a percentage of net sales increased 180 basis points to 37.0% Operating income increased 22.8% to $14.3 million and increased 39.8% to $15.8 million on an adjusted basis Net income increased 20.0% to $6.8 million or $0.93 per diluted share Adjusted net income increased 47.6% to $8.0 million or $1.09 per diluted share Inventories decreased 26.5% year-over-year Total debt at September 30, 2023 was down 24.9% compared with September 30, 2022 Jason Brooks, Chairman, President and Chief Executive Officer, said, “Our quarterly performance saw meaningful improvement on a sequential basis as demand for our product improved, resulting in further reduced channel inventory levels and an acceleration in at-once orders from many of our key wholesale partners. Despite the difficult start to 2023, we were confident that our results for the first half of 2023 reflected macroeconomic headwinds and industry dynamics more than the strength and desirability of our brand portfolio. While current market conditions remain challenging, the pace of our sales picked up in the third quarter driven by improved retailer inventory positions and ongoing consumer demand for our durable, innovative and accessibly priced work, western and outdoor footwear. At the same time, the work we’ve done to enhance our distribution and fulfillment capabilities and reduce operating expenses translated into significantly higher quarterly profitability year-over-year, which along with lower inventories allowed us to pay down debt by nearly 25% over the same time period. Looking ahead, we believe we are well positioned to improve on recent trends in the fourth quarter and begin 2024 with an improved balance sheet and good momentum across our business.” Third Quarter 2023 Review Third quarter net sales decreased 14.8% to $125.6 million compared with $147.5 million in the third quarter of 2022. Adjusted net sales, which exclude the sale of inventory related to the divesture of the NEOS brand during the third quarter of 2022, decreased 12.7%. Wholesale segment sales for the third quarter decreased 17.4% to $99.7 million compared to $120.7 million for the same period in 2022. Retail segment sales for the third quarter increased 4.7% to $24.5 million compared to $23.4 million for the same period last year. Contract Manufacturing segment sales, which include contract military sales and private label programs, were $1.4 million in the third quarter of 2023 compared to $3.3 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. Gross margin in the third quarter of 2023 was $46.5 million, or 37.0% of net sales, compared to $51.9 million, or 35.2% of net sales, for the same period last year. Excluding the cost of goods sold related to the NEOS brand inventory sold during the year ago period, adjusted gross margin for the third quarter 2022 was $50.8, million, or 35.3%. The 170-basis point increase in adjusted 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 sales from Wholesale and Contract Manufacturing segments. Operating expenses were $32.3 million, or 25.7% of net sales, for the third quarter of 2023 compared to $40.3 million, or 27.3% of net sales, for the same period a year ago. Adjusted operating expenses were $30.7 million in the current year period compared to adjusted operating expenses of $39.5 million in the year ago period. The decrease in operating expenses was driven primarily by a decrease in out-bound freight expense and other 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 improved 290 basis points to 24.5% in the third quarter of 2023 compared with 27.4% in the year ago period. Income from operations for the third quarter of 2023 was $14.3 million, or 11.4% of net sales, compared to $11.6 million or 7.9% of net sales for the same period a year ago. Adjusted operating income for the third quarter of 2023 was $15.8 million, or 12.6% of adjusted net sales, compared to adjusted operating income of $11.3 million, or 7.9% of adjusted net sales a year ago. Interest expense for the third quarter of 2023 was $5.8 million compared with $4.2 million a year ago. The increase reflected increased interest rates on the senior term loan and credit facility. The Company reported third quarter 2023 net income of $6.8 million, or $0.93 per diluted share, compared to net income of $5.7 million, or $0.77 per diluted share, in the third quarter of 2022. Adjusted net income for the third quarter of 2023 was $8.0 million, or $1.09 per diluted share, compared to adjusted net income of $5.5 million, or $0.74 per diluted share in the year ago period. Balance Sheet Review Cash and cash equivalents were $4.2 million at September 30, 2023 compared to $7.3 million on the same date a year ago. Total debt at September 30, 2023 was $213.9 million consisting of $88.6 million on our senior term loan and $127.4 million of borrowings under the Company's senior secured asset-backed credit facility. Compared with September 30, 2022 and December 31, 2022, total debt at September 30, 2023 was down 24.9% and 16.7%, respectively. Inventories at September 30, 2023 were $194.7 million, down 26.5% compared to $265.1 million on the same date a year ago and down 17.3% compared with $235.4 million at December 31, 2022. Conference Call Information The Company's conference call to review third quarter 2023 results will be broadcast live over the internet today, Wednesday, November 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 the positioning of the Company's business for improvement based on recent trends in the fourth quarter (Paragraph 2) and beginning 2024 with a strong balance sheet and good momentum across the Company's business (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 quarters ended March 31, 2023 (filed May 10, 2023), and June 30, 2023 (filed August 9, 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) September 30, December 31, September 30, 2023 2022 2022 ASSETS: CURRENT ASSETS: Cash and cash equivalents $ 4,240 $ 5,719 $ 7,277 Trade receivables – net 97,844 94,953 118,193 Contract receivables 2,990 - - Other receivables 2,207 908 490 Inventories – net 194,734 235,400 265,082 Income tax receivable 2,445 - 1,633 Prepaid expenses 4,985 4,067 4,360 Total current assets 309,445 341,047 397,035 LEASED ASSETS 7,982 11,014 9,971 PROPERTY, PLANT & EQUIPMENT – net 53,124 57,359 60,271 GOODWILL 47,844 50,246 50,246 IDENTIFIED INTANGIBLES – net 113,321 121,782 122,552 OTHER ASSETS 1,015 942 878 TOTAL ASSETS $ 532,731 $ 582,390 $ 640,953 LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $ 62,733 $ 69,686 $ 101,683 Contract liabilities 2,990 - - Current Portion of Long-Term Debt 2,704 3,250 3,250 Accrued expenses: Salaries and wages 2,685 1,253 3,667 Taxes – other 832 1,325 1,784 Accrued freight 2,707 2,413 3,842 Commissions 823 1,934 1,619 Accrued duty 6,395 6,764 8,051 Accrued interest 2,280 2,822 2,314 Income tax payable - 1,172 - Other 5,553 5,675 5,486 Total current liabilities 89,702 96,294 131,696 LONG-TERM DEBT 211,190 253,646 281,515 LONG-TERM TAXES PAYABLE 169 169 169 LONG-TERM LEASE 5,715 8,216 7,394 DEFERRED INCOME TAXES 8,006 8,006 10,293 DEFERRED LIABILITIES 1,179 586 558 TOTAL LIABILITIES 315,961 366,917 431,625 SHAREHOLDERS' EQUITY: Common stock, no par value; 25,000,000 shares authorized; issued and outstanding September 30, 2023 - 7,366,201; December 31, 2022 - 7,339,011; September 30, 2022 - 7,322,232 70,757 69,752 68,986 Retained earnings 146,013 145,721 140,342 Total shareholders' equity 216,770 215,473 209,328 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 532,731 $ 582,390 $ 640,953 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, 2023 2022 2023 2022 NET SALES $ 125,614 $ 147,486 $ 335,881 $ 476,549 COST OF GOODS SOLD 79,076 95,556 208,012 308,042 GROSS MARGIN 46,538 51,930 127,869 168,507 OPERATING EXPENSES 32,259 40,305 107,233 138,089 INCOME FROM OPERATIONS 14,279 11,625 20,636 30,418 INTEREST EXPENSE AND OTHER – net (5,649 ) (4,181 ) (15,943 ) (12,411 ) INCOME BEFORE INCOME TAX EXPENSE 8,630 7,444 4,693 18,007 INCOME TAX EXPENSE 1,803 1,753 980 4,057 NET INCOME $ 6,827 $ 5,691 $ 3,713 $ 13,950 INCOME PER SHARE Basic $ 0.93 $ 0.78 $ 0.50 $ 1.91 Diluted $ 0.93 $ 0.77 $ 0.50 $ 1.89 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 7,366 7,319 7,355 7,313 Diluted 7,375 7,349 7,374 7,382 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, 2023 2022 2023 2022 NET SALES NET SALES, AS REPORTED $ 125,614 $ 147,486 $ 335,881 $ 476,549 ADD: RETURNS RELATING TO SUPPLIER DISPUTE - - 1,542 - LESS: DISPOSITION OF INVENTORY ASSETS - (3,569 ) - (3,569 ) ADJUSTED NET SALES $ 125,614 $ 143,917 $ 337,423 $ 472,980 COST OF GOODS SOLD COST OF GOODS SOLD, AS REPORTED $ 79,076 $ 95,556 $ 208,012 $ 308,042 LESS: SUPPLIER DISPUTE INVENTORY ADJUSTMENT - - (181 ) - LESS: DISPOSITION OF INVENTORY ASSETS - (2,444 ) (2,444 ) ADJUSTED COST OF GOODS SOLD $ 79,076 $ 93,112 $ 207,831 $ 305,598 GROSS MARGIN GROSS MARGIN, AS REPORTED $ 46,538 $ 51,930 $ 127,869 $ 168,507 ADJUSTED GROSS MARGIN $ 46,538 $ 50,805 $ 129,592 $ 167,382 OPERATING EXPENSES OPERATING EXPENSES, AS REPORTED $ 32,259 $ 40,305 $ 107,233 $ 138,089 LESS: ACQUISITION-RELATED AMORTIZATION (692 ) (782 ) (2,148 ) (2,346 ) LESS: DISPOSITION OF ASSETS - (33 ) - (33 ) LESS: CLOSURE OF MANUFACTURING FACILITY (398 ) - (398 ) - LESS: ACQUISITION-RELATED INTEGRATION EXPENSES - - - (397 ) LESS: RESTRUCTURING COSTS (453 ) - (1,486 ) (1,201 ) ADJUSTED OPERATING EXPENSES $ 30,716 $ 39,490 $ 103,201 $ 134,112 ADJUSTED OPERATING INCOME $ 15,822 $ 11,315 $ 26,391 $ 33,270 INTEREST EXPENSE AND OTHER – net INTEREST EXPENSE AND OTHER – net , AS REPORTED $ (5,649 ) $ (4,181 ) $ (15,943 ) $ (12,411 ) LESS: GAIN ON SALE OF BUSINESS - - (1,341 ) - ADJUSTED INTEREST EXPENSE AND OTHER – net (5,649 ) (4,181 ) (17,284 ) (12,411 ) NET INCOME NET INCOME, AS REPORTED $ 6,827 $ 5,691 $ 3,713 $ 13,950 TOTAL NON-GAAP ADJUSTMENTS 1,543 (310 ) 4,414 2,852 TAX IMPACT OF ADJUSTMENTS (322 ) 73 (922 ) (643 ) ADJUSTED NET INCOME $ 8,048 $ 5,454 $ 7,205 $ 16,159 NET INCOME PER SHARE, AS REPORTED BASIC $ 0.93 $ 0.78 $ 0.50 $ 1.91 DILUTED $ 0.93 $ 0.77 $ 0.50 $ 1.89 ADJUSTED NET INCOME PER SHARE BASIC $ 1.09 $ 0.75 $ 0.98 $ 2.21 DILUTED $ 1.09 $ 0.74 $ 0.98 $ 2.19 WEIGHTED AVERAGE SHARES OUTSTANDING BASIC 7,366 7,319 7,355 7,313 DILUTED 7,375 7,349 7,374 7,382 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 cost 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 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 Disposition of Inventory Assets Disposition of inventory assets relate to the sale of inventory and related cost of goods sold in connection with the divesture of the NEOS brand. We exclude the disposition of inventory assets for purposes of calculating certain non-GAAP measures because the sale and related cost of goods sold does not reflect our normal business operations. These adjustments facilitate a useful evaluation of our current operating performance and comparisons to past operating results and provide investors with additional means to evaluate cost trends. 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 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. Disposition of Assets Disposition of fixed assets relate disposals of non-financial assets. This includes the disposal of non-financial assets and corresponding expenses related to the divesture of the NEOS brand and other long-lived assets at our manufacturing facilities. We exclude the disposition of non-financial assets and related expenses for purposes of calculating certain non-GAAP measures because the loss does not accurately reflect our current operating performance and comparisons to past operating results and provide investors with additional means to evaluate cost 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. Closure of Manufacturing Facility Closure of manufacturing facility relates to the expenses and overhead incurred associated with closing our Rock Island manufacturing facility. We exclude costs associated with the closure of our manufacturing facility 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 comparison 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/20231101188550/en/Contacts Company Contact: Tom Robertson Chief Operating Officer, Chief Financial Officer and Treasurer (740) 753-9100 Investor Relations: Brendon Frey ICR, Inc. (203) 682-8200 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Rocky Brands, Inc. Announces Third Quarter 2023 Results By: Rocky Brands, Inc. via Business Wire November 01, 2023 at 16:05 PM EDT Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial results for its third quarter ended September 30, 2023. Third Quarter 2023 Overview Net sales were $125.6 million, a decrease of 14.8% (or 12.7% on an adjusted basis) Wholesale segment sales decreased 17.4% (or 14.9% on an adjusted basis) Retail segment sales increased 4.7% Gross margin as a percentage of net sales increased 180 basis points to 37.0% Operating income increased 22.8% to $14.3 million and increased 39.8% to $15.8 million on an adjusted basis Net income increased 20.0% to $6.8 million or $0.93 per diluted share Adjusted net income increased 47.6% to $8.0 million or $1.09 per diluted share Inventories decreased 26.5% year-over-year Total debt at September 30, 2023 was down 24.9% compared with September 30, 2022 Jason Brooks, Chairman, President and Chief Executive Officer, said, “Our quarterly performance saw meaningful improvement on a sequential basis as demand for our product improved, resulting in further reduced channel inventory levels and an acceleration in at-once orders from many of our key wholesale partners. Despite the difficult start to 2023, we were confident that our results for the first half of 2023 reflected macroeconomic headwinds and industry dynamics more than the strength and desirability of our brand portfolio. While current market conditions remain challenging, the pace of our sales picked up in the third quarter driven by improved retailer inventory positions and ongoing consumer demand for our durable, innovative and accessibly priced work, western and outdoor footwear. At the same time, the work we’ve done to enhance our distribution and fulfillment capabilities and reduce operating expenses translated into significantly higher quarterly profitability year-over-year, which along with lower inventories allowed us to pay down debt by nearly 25% over the same time period. Looking ahead, we believe we are well positioned to improve on recent trends in the fourth quarter and begin 2024 with an improved balance sheet and good momentum across our business.” Third Quarter 2023 Review Third quarter net sales decreased 14.8% to $125.6 million compared with $147.5 million in the third quarter of 2022. Adjusted net sales, which exclude the sale of inventory related to the divesture of the NEOS brand during the third quarter of 2022, decreased 12.7%. Wholesale segment sales for the third quarter decreased 17.4% to $99.7 million compared to $120.7 million for the same period in 2022. Retail segment sales for the third quarter increased 4.7% to $24.5 million compared to $23.4 million for the same period last year. Contract Manufacturing segment sales, which include contract military sales and private label programs, were $1.4 million in the third quarter of 2023 compared to $3.3 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. Gross margin in the third quarter of 2023 was $46.5 million, or 37.0% of net sales, compared to $51.9 million, or 35.2% of net sales, for the same period last year. Excluding the cost of goods sold related to the NEOS brand inventory sold during the year ago period, adjusted gross margin for the third quarter 2022 was $50.8, million, or 35.3%. The 170-basis point increase in adjusted 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 sales from Wholesale and Contract Manufacturing segments. Operating expenses were $32.3 million, or 25.7% of net sales, for the third quarter of 2023 compared to $40.3 million, or 27.3% of net sales, for the same period a year ago. Adjusted operating expenses were $30.7 million in the current year period compared to adjusted operating expenses of $39.5 million in the year ago period. The decrease in operating expenses was driven primarily by a decrease in out-bound freight expense and other 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 improved 290 basis points to 24.5% in the third quarter of 2023 compared with 27.4% in the year ago period. Income from operations for the third quarter of 2023 was $14.3 million, or 11.4% of net sales, compared to $11.6 million or 7.9% of net sales for the same period a year ago. Adjusted operating income for the third quarter of 2023 was $15.8 million, or 12.6% of adjusted net sales, compared to adjusted operating income of $11.3 million, or 7.9% of adjusted net sales a year ago. Interest expense for the third quarter of 2023 was $5.8 million compared with $4.2 million a year ago. The increase reflected increased interest rates on the senior term loan and credit facility. The Company reported third quarter 2023 net income of $6.8 million, or $0.93 per diluted share, compared to net income of $5.7 million, or $0.77 per diluted share, in the third quarter of 2022. Adjusted net income for the third quarter of 2023 was $8.0 million, or $1.09 per diluted share, compared to adjusted net income of $5.5 million, or $0.74 per diluted share in the year ago period. Balance Sheet Review Cash and cash equivalents were $4.2 million at September 30, 2023 compared to $7.3 million on the same date a year ago. Total debt at September 30, 2023 was $213.9 million consisting of $88.6 million on our senior term loan and $127.4 million of borrowings under the Company's senior secured asset-backed credit facility. Compared with September 30, 2022 and December 31, 2022, total debt at September 30, 2023 was down 24.9% and 16.7%, respectively. Inventories at September 30, 2023 were $194.7 million, down 26.5% compared to $265.1 million on the same date a year ago and down 17.3% compared with $235.4 million at December 31, 2022. Conference Call Information The Company's conference call to review third quarter 2023 results will be broadcast live over the internet today, Wednesday, November 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 the positioning of the Company's business for improvement based on recent trends in the fourth quarter (Paragraph 2) and beginning 2024 with a strong balance sheet and good momentum across the Company's business (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 quarters ended March 31, 2023 (filed May 10, 2023), and June 30, 2023 (filed August 9, 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) September 30, December 31, September 30, 2023 2022 2022 ASSETS: CURRENT ASSETS: Cash and cash equivalents $ 4,240 $ 5,719 $ 7,277 Trade receivables – net 97,844 94,953 118,193 Contract receivables 2,990 - - Other receivables 2,207 908 490 Inventories – net 194,734 235,400 265,082 Income tax receivable 2,445 - 1,633 Prepaid expenses 4,985 4,067 4,360 Total current assets 309,445 341,047 397,035 LEASED ASSETS 7,982 11,014 9,971 PROPERTY, PLANT & EQUIPMENT – net 53,124 57,359 60,271 GOODWILL 47,844 50,246 50,246 IDENTIFIED INTANGIBLES – net 113,321 121,782 122,552 OTHER ASSETS 1,015 942 878 TOTAL ASSETS $ 532,731 $ 582,390 $ 640,953 LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $ 62,733 $ 69,686 $ 101,683 Contract liabilities 2,990 - - Current Portion of Long-Term Debt 2,704 3,250 3,250 Accrued expenses: Salaries and wages 2,685 1,253 3,667 Taxes – other 832 1,325 1,784 Accrued freight 2,707 2,413 3,842 Commissions 823 1,934 1,619 Accrued duty 6,395 6,764 8,051 Accrued interest 2,280 2,822 2,314 Income tax payable - 1,172 - Other 5,553 5,675 5,486 Total current liabilities 89,702 96,294 131,696 LONG-TERM DEBT 211,190 253,646 281,515 LONG-TERM TAXES PAYABLE 169 169 169 LONG-TERM LEASE 5,715 8,216 7,394 DEFERRED INCOME TAXES 8,006 8,006 10,293 DEFERRED LIABILITIES 1,179 586 558 TOTAL LIABILITIES 315,961 366,917 431,625 SHAREHOLDERS' EQUITY: Common stock, no par value; 25,000,000 shares authorized; issued and outstanding September 30, 2023 - 7,366,201; December 31, 2022 - 7,339,011; September 30, 2022 - 7,322,232 70,757 69,752 68,986 Retained earnings 146,013 145,721 140,342 Total shareholders' equity 216,770 215,473 209,328 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 532,731 $ 582,390 $ 640,953 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, 2023 2022 2023 2022 NET SALES $ 125,614 $ 147,486 $ 335,881 $ 476,549 COST OF GOODS SOLD 79,076 95,556 208,012 308,042 GROSS MARGIN 46,538 51,930 127,869 168,507 OPERATING EXPENSES 32,259 40,305 107,233 138,089 INCOME FROM OPERATIONS 14,279 11,625 20,636 30,418 INTEREST EXPENSE AND OTHER – net (5,649 ) (4,181 ) (15,943 ) (12,411 ) INCOME BEFORE INCOME TAX EXPENSE 8,630 7,444 4,693 18,007 INCOME TAX EXPENSE 1,803 1,753 980 4,057 NET INCOME $ 6,827 $ 5,691 $ 3,713 $ 13,950 INCOME PER SHARE Basic $ 0.93 $ 0.78 $ 0.50 $ 1.91 Diluted $ 0.93 $ 0.77 $ 0.50 $ 1.89 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 7,366 7,319 7,355 7,313 Diluted 7,375 7,349 7,374 7,382 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, 2023 2022 2023 2022 NET SALES NET SALES, AS REPORTED $ 125,614 $ 147,486 $ 335,881 $ 476,549 ADD: RETURNS RELATING TO SUPPLIER DISPUTE - - 1,542 - LESS: DISPOSITION OF INVENTORY ASSETS - (3,569 ) - (3,569 ) ADJUSTED NET SALES $ 125,614 $ 143,917 $ 337,423 $ 472,980 COST OF GOODS SOLD COST OF GOODS SOLD, AS REPORTED $ 79,076 $ 95,556 $ 208,012 $ 308,042 LESS: SUPPLIER DISPUTE INVENTORY ADJUSTMENT - - (181 ) - LESS: DISPOSITION OF INVENTORY ASSETS - (2,444 ) (2,444 ) ADJUSTED COST OF GOODS SOLD $ 79,076 $ 93,112 $ 207,831 $ 305,598 GROSS MARGIN GROSS MARGIN, AS REPORTED $ 46,538 $ 51,930 $ 127,869 $ 168,507 ADJUSTED GROSS MARGIN $ 46,538 $ 50,805 $ 129,592 $ 167,382 OPERATING EXPENSES OPERATING EXPENSES, AS REPORTED $ 32,259 $ 40,305 $ 107,233 $ 138,089 LESS: ACQUISITION-RELATED AMORTIZATION (692 ) (782 ) (2,148 ) (2,346 ) LESS: DISPOSITION OF ASSETS - (33 ) - (33 ) LESS: CLOSURE OF MANUFACTURING FACILITY (398 ) - (398 ) - LESS: ACQUISITION-RELATED INTEGRATION EXPENSES - - - (397 ) LESS: RESTRUCTURING COSTS (453 ) - (1,486 ) (1,201 ) ADJUSTED OPERATING EXPENSES $ 30,716 $ 39,490 $ 103,201 $ 134,112 ADJUSTED OPERATING INCOME $ 15,822 $ 11,315 $ 26,391 $ 33,270 INTEREST EXPENSE AND OTHER – net INTEREST EXPENSE AND OTHER – net , AS REPORTED $ (5,649 ) $ (4,181 ) $ (15,943 ) $ (12,411 ) LESS: GAIN ON SALE OF BUSINESS - - (1,341 ) - ADJUSTED INTEREST EXPENSE AND OTHER – net (5,649 ) (4,181 ) (17,284 ) (12,411 ) NET INCOME NET INCOME, AS REPORTED $ 6,827 $ 5,691 $ 3,713 $ 13,950 TOTAL NON-GAAP ADJUSTMENTS 1,543 (310 ) 4,414 2,852 TAX IMPACT OF ADJUSTMENTS (322 ) 73 (922 ) (643 ) ADJUSTED NET INCOME $ 8,048 $ 5,454 $ 7,205 $ 16,159 NET INCOME PER SHARE, AS REPORTED BASIC $ 0.93 $ 0.78 $ 0.50 $ 1.91 DILUTED $ 0.93 $ 0.77 $ 0.50 $ 1.89 ADJUSTED NET INCOME PER SHARE BASIC $ 1.09 $ 0.75 $ 0.98 $ 2.21 DILUTED $ 1.09 $ 0.74 $ 0.98 $ 2.19 WEIGHTED AVERAGE SHARES OUTSTANDING BASIC 7,366 7,319 7,355 7,313 DILUTED 7,375 7,349 7,374 7,382 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 cost 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 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 Disposition of Inventory Assets Disposition of inventory assets relate to the sale of inventory and related cost of goods sold in connection with the divesture of the NEOS brand. We exclude the disposition of inventory assets for purposes of calculating certain non-GAAP measures because the sale and related cost of goods sold does not reflect our normal business operations. These adjustments facilitate a useful evaluation of our current operating performance and comparisons to past operating results and provide investors with additional means to evaluate cost trends. 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 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. Disposition of Assets Disposition of fixed assets relate disposals of non-financial assets. This includes the disposal of non-financial assets and corresponding expenses related to the divesture of the NEOS brand and other long-lived assets at our manufacturing facilities. We exclude the disposition of non-financial assets and related expenses for purposes of calculating certain non-GAAP measures because the loss does not accurately reflect our current operating performance and comparisons to past operating results and provide investors with additional means to evaluate cost 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. Closure of Manufacturing Facility Closure of manufacturing facility relates to the expenses and overhead incurred associated with closing our Rock Island manufacturing facility. We exclude costs associated with the closure of our manufacturing facility 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 comparison 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/20231101188550/en/Contacts Company Contact: Tom Robertson Chief Operating Officer, Chief Financial Officer and Treasurer (740) 753-9100 Investor Relations: Brendon Frey ICR, Inc. (203) 682-8200
Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial results for its third quarter ended September 30, 2023. Third Quarter 2023 Overview Net sales were $125.6 million, a decrease of 14.8% (or 12.7% on an adjusted basis) Wholesale segment sales decreased 17.4% (or 14.9% on an adjusted basis) Retail segment sales increased 4.7% Gross margin as a percentage of net sales increased 180 basis points to 37.0% Operating income increased 22.8% to $14.3 million and increased 39.8% to $15.8 million on an adjusted basis Net income increased 20.0% to $6.8 million or $0.93 per diluted share Adjusted net income increased 47.6% to $8.0 million or $1.09 per diluted share Inventories decreased 26.5% year-over-year Total debt at September 30, 2023 was down 24.9% compared with September 30, 2022 Jason Brooks, Chairman, President and Chief Executive Officer, said, “Our quarterly performance saw meaningful improvement on a sequential basis as demand for our product improved, resulting in further reduced channel inventory levels and an acceleration in at-once orders from many of our key wholesale partners. Despite the difficult start to 2023, we were confident that our results for the first half of 2023 reflected macroeconomic headwinds and industry dynamics more than the strength and desirability of our brand portfolio. While current market conditions remain challenging, the pace of our sales picked up in the third quarter driven by improved retailer inventory positions and ongoing consumer demand for our durable, innovative and accessibly priced work, western and outdoor footwear. At the same time, the work we’ve done to enhance our distribution and fulfillment capabilities and reduce operating expenses translated into significantly higher quarterly profitability year-over-year, which along with lower inventories allowed us to pay down debt by nearly 25% over the same time period. Looking ahead, we believe we are well positioned to improve on recent trends in the fourth quarter and begin 2024 with an improved balance sheet and good momentum across our business.” Third Quarter 2023 Review Third quarter net sales decreased 14.8% to $125.6 million compared with $147.5 million in the third quarter of 2022. Adjusted net sales, which exclude the sale of inventory related to the divesture of the NEOS brand during the third quarter of 2022, decreased 12.7%. Wholesale segment sales for the third quarter decreased 17.4% to $99.7 million compared to $120.7 million for the same period in 2022. Retail segment sales for the third quarter increased 4.7% to $24.5 million compared to $23.4 million for the same period last year. Contract Manufacturing segment sales, which include contract military sales and private label programs, were $1.4 million in the third quarter of 2023 compared to $3.3 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. Gross margin in the third quarter of 2023 was $46.5 million, or 37.0% of net sales, compared to $51.9 million, or 35.2% of net sales, for the same period last year. Excluding the cost of goods sold related to the NEOS brand inventory sold during the year ago period, adjusted gross margin for the third quarter 2022 was $50.8, million, or 35.3%. The 170-basis point increase in adjusted 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 sales from Wholesale and Contract Manufacturing segments. Operating expenses were $32.3 million, or 25.7% of net sales, for the third quarter of 2023 compared to $40.3 million, or 27.3% of net sales, for the same period a year ago. Adjusted operating expenses were $30.7 million in the current year period compared to adjusted operating expenses of $39.5 million in the year ago period. The decrease in operating expenses was driven primarily by a decrease in out-bound freight expense and other 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 improved 290 basis points to 24.5% in the third quarter of 2023 compared with 27.4% in the year ago period. Income from operations for the third quarter of 2023 was $14.3 million, or 11.4% of net sales, compared to $11.6 million or 7.9% of net sales for the same period a year ago. Adjusted operating income for the third quarter of 2023 was $15.8 million, or 12.6% of adjusted net sales, compared to adjusted operating income of $11.3 million, or 7.9% of adjusted net sales a year ago. Interest expense for the third quarter of 2023 was $5.8 million compared with $4.2 million a year ago. The increase reflected increased interest rates on the senior term loan and credit facility. The Company reported third quarter 2023 net income of $6.8 million, or $0.93 per diluted share, compared to net income of $5.7 million, or $0.77 per diluted share, in the third quarter of 2022. Adjusted net income for the third quarter of 2023 was $8.0 million, or $1.09 per diluted share, compared to adjusted net income of $5.5 million, or $0.74 per diluted share in the year ago period. Balance Sheet Review Cash and cash equivalents were $4.2 million at September 30, 2023 compared to $7.3 million on the same date a year ago. Total debt at September 30, 2023 was $213.9 million consisting of $88.6 million on our senior term loan and $127.4 million of borrowings under the Company's senior secured asset-backed credit facility. Compared with September 30, 2022 and December 31, 2022, total debt at September 30, 2023 was down 24.9% and 16.7%, respectively. Inventories at September 30, 2023 were $194.7 million, down 26.5% compared to $265.1 million on the same date a year ago and down 17.3% compared with $235.4 million at December 31, 2022. Conference Call Information The Company's conference call to review third quarter 2023 results will be broadcast live over the internet today, Wednesday, November 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 the positioning of the Company's business for improvement based on recent trends in the fourth quarter (Paragraph 2) and beginning 2024 with a strong balance sheet and good momentum across the Company's business (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 quarters ended March 31, 2023 (filed May 10, 2023), and June 30, 2023 (filed August 9, 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) September 30, December 31, September 30, 2023 2022 2022 ASSETS: CURRENT ASSETS: Cash and cash equivalents $ 4,240 $ 5,719 $ 7,277 Trade receivables – net 97,844 94,953 118,193 Contract receivables 2,990 - - Other receivables 2,207 908 490 Inventories – net 194,734 235,400 265,082 Income tax receivable 2,445 - 1,633 Prepaid expenses 4,985 4,067 4,360 Total current assets 309,445 341,047 397,035 LEASED ASSETS 7,982 11,014 9,971 PROPERTY, PLANT & EQUIPMENT – net 53,124 57,359 60,271 GOODWILL 47,844 50,246 50,246 IDENTIFIED INTANGIBLES – net 113,321 121,782 122,552 OTHER ASSETS 1,015 942 878 TOTAL ASSETS $ 532,731 $ 582,390 $ 640,953 LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $ 62,733 $ 69,686 $ 101,683 Contract liabilities 2,990 - - Current Portion of Long-Term Debt 2,704 3,250 3,250 Accrued expenses: Salaries and wages 2,685 1,253 3,667 Taxes – other 832 1,325 1,784 Accrued freight 2,707 2,413 3,842 Commissions 823 1,934 1,619 Accrued duty 6,395 6,764 8,051 Accrued interest 2,280 2,822 2,314 Income tax payable - 1,172 - Other 5,553 5,675 5,486 Total current liabilities 89,702 96,294 131,696 LONG-TERM DEBT 211,190 253,646 281,515 LONG-TERM TAXES PAYABLE 169 169 169 LONG-TERM LEASE 5,715 8,216 7,394 DEFERRED INCOME TAXES 8,006 8,006 10,293 DEFERRED LIABILITIES 1,179 586 558 TOTAL LIABILITIES 315,961 366,917 431,625 SHAREHOLDERS' EQUITY: Common stock, no par value; 25,000,000 shares authorized; issued and outstanding September 30, 2023 - 7,366,201; December 31, 2022 - 7,339,011; September 30, 2022 - 7,322,232 70,757 69,752 68,986 Retained earnings 146,013 145,721 140,342 Total shareholders' equity 216,770 215,473 209,328 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 532,731 $ 582,390 $ 640,953 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, 2023 2022 2023 2022 NET SALES $ 125,614 $ 147,486 $ 335,881 $ 476,549 COST OF GOODS SOLD 79,076 95,556 208,012 308,042 GROSS MARGIN 46,538 51,930 127,869 168,507 OPERATING EXPENSES 32,259 40,305 107,233 138,089 INCOME FROM OPERATIONS 14,279 11,625 20,636 30,418 INTEREST EXPENSE AND OTHER – net (5,649 ) (4,181 ) (15,943 ) (12,411 ) INCOME BEFORE INCOME TAX EXPENSE 8,630 7,444 4,693 18,007 INCOME TAX EXPENSE 1,803 1,753 980 4,057 NET INCOME $ 6,827 $ 5,691 $ 3,713 $ 13,950 INCOME PER SHARE Basic $ 0.93 $ 0.78 $ 0.50 $ 1.91 Diluted $ 0.93 $ 0.77 $ 0.50 $ 1.89 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 7,366 7,319 7,355 7,313 Diluted 7,375 7,349 7,374 7,382 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, 2023 2022 2023 2022 NET SALES NET SALES, AS REPORTED $ 125,614 $ 147,486 $ 335,881 $ 476,549 ADD: RETURNS RELATING TO SUPPLIER DISPUTE - - 1,542 - LESS: DISPOSITION OF INVENTORY ASSETS - (3,569 ) - (3,569 ) ADJUSTED NET SALES $ 125,614 $ 143,917 $ 337,423 $ 472,980 COST OF GOODS SOLD COST OF GOODS SOLD, AS REPORTED $ 79,076 $ 95,556 $ 208,012 $ 308,042 LESS: SUPPLIER DISPUTE INVENTORY ADJUSTMENT - - (181 ) - LESS: DISPOSITION OF INVENTORY ASSETS - (2,444 ) (2,444 ) ADJUSTED COST OF GOODS SOLD $ 79,076 $ 93,112 $ 207,831 $ 305,598 GROSS MARGIN GROSS MARGIN, AS REPORTED $ 46,538 $ 51,930 $ 127,869 $ 168,507 ADJUSTED GROSS MARGIN $ 46,538 $ 50,805 $ 129,592 $ 167,382 OPERATING EXPENSES OPERATING EXPENSES, AS REPORTED $ 32,259 $ 40,305 $ 107,233 $ 138,089 LESS: ACQUISITION-RELATED AMORTIZATION (692 ) (782 ) (2,148 ) (2,346 ) LESS: DISPOSITION OF ASSETS - (33 ) - (33 ) LESS: CLOSURE OF MANUFACTURING FACILITY (398 ) - (398 ) - LESS: ACQUISITION-RELATED INTEGRATION EXPENSES - - - (397 ) LESS: RESTRUCTURING COSTS (453 ) - (1,486 ) (1,201 ) ADJUSTED OPERATING EXPENSES $ 30,716 $ 39,490 $ 103,201 $ 134,112 ADJUSTED OPERATING INCOME $ 15,822 $ 11,315 $ 26,391 $ 33,270 INTEREST EXPENSE AND OTHER – net INTEREST EXPENSE AND OTHER – net , AS REPORTED $ (5,649 ) $ (4,181 ) $ (15,943 ) $ (12,411 ) LESS: GAIN ON SALE OF BUSINESS - - (1,341 ) - ADJUSTED INTEREST EXPENSE AND OTHER – net (5,649 ) (4,181 ) (17,284 ) (12,411 ) NET INCOME NET INCOME, AS REPORTED $ 6,827 $ 5,691 $ 3,713 $ 13,950 TOTAL NON-GAAP ADJUSTMENTS 1,543 (310 ) 4,414 2,852 TAX IMPACT OF ADJUSTMENTS (322 ) 73 (922 ) (643 ) ADJUSTED NET INCOME $ 8,048 $ 5,454 $ 7,205 $ 16,159 NET INCOME PER SHARE, AS REPORTED BASIC $ 0.93 $ 0.78 $ 0.50 $ 1.91 DILUTED $ 0.93 $ 0.77 $ 0.50 $ 1.89 ADJUSTED NET INCOME PER SHARE BASIC $ 1.09 $ 0.75 $ 0.98 $ 2.21 DILUTED $ 1.09 $ 0.74 $ 0.98 $ 2.19 WEIGHTED AVERAGE SHARES OUTSTANDING BASIC 7,366 7,319 7,355 7,313 DILUTED 7,375 7,349 7,374 7,382 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 cost 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 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 Disposition of Inventory Assets Disposition of inventory assets relate to the sale of inventory and related cost of goods sold in connection with the divesture of the NEOS brand. We exclude the disposition of inventory assets for purposes of calculating certain non-GAAP measures because the sale and related cost of goods sold does not reflect our normal business operations. These adjustments facilitate a useful evaluation of our current operating performance and comparisons to past operating results and provide investors with additional means to evaluate cost trends. 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 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. Disposition of Assets Disposition of fixed assets relate disposals of non-financial assets. This includes the disposal of non-financial assets and corresponding expenses related to the divesture of the NEOS brand and other long-lived assets at our manufacturing facilities. We exclude the disposition of non-financial assets and related expenses for purposes of calculating certain non-GAAP measures because the loss does not accurately reflect our current operating performance and comparisons to past operating results and provide investors with additional means to evaluate cost 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. Closure of Manufacturing Facility Closure of manufacturing facility relates to the expenses and overhead incurred associated with closing our Rock Island manufacturing facility. We exclude costs associated with the closure of our manufacturing facility 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 comparison 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/20231101188550/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
