Rocky Brands(RCKY) - 2024 Q2 - Quarterly Report

Financial Performance - Net sales for Q2 2024 decreased by 1.6% to $98.3 million compared to $99.8 million in Q2 2023[65] - Operating income for Q2 2024 increased by 104.7% to $4.5 million from $2.2 million in Q2 2023[65] - For the first half of 2024, net sales increased by 0.4% to $211.2 million compared to $210.3 million in the first half of 2023[66] - Income from operations for the first half of 2024 was $12.5 million, or 5.9% of net sales, compared to $6.4 million, or 3.0% of net sales in the same period last year[73] - Total net sales for the six months ended June 30, 2024, were $211.2 million, a slight increase of 0.4% compared to $210.3 million for the same period in 2023[81] Debt and Expenses - Total debt decreased by 31.3% to $152.4 million as of June 30, 2024[65] - Operating expenses for Q2 2024 were $33.5 million, or 34.1% of net sales, down from $35.4 million, or 35.4% of net sales in Q2 2023[71] - Operating expenses decreased by 7.0% to $69.7 million, representing 33.0% of net sales, down from 35.7% in the same period last year[85] - Interest expense increased by 4.8% to $10.8 million, influenced by a term loan extinguishment charge and lower debt levels compared to the previous year[86] Sales Breakdown - Wholesale net sales decreased by 2.3% to $148.1 million for the six months ended June 30, 2024, down from $151.5 million in the prior year, primarily due to the sale of the Servus brand and non-recurring military sales[81][82] - Retail net sales increased by 3.5% to $56.5 million, driven by growth in e-commerce and targeted digital marketing efforts[82] - Contract Manufacturing segment sales increased by 18.7% to $3.9 million in Q2 2024, driven by a new multi-year contract with the U.S. Military[74] - Contract manufacturing net sales surged by 58.5% to $6.6 million, attributed to a multi-year contract with the U.S. Military[82] Margins and Gains - Gross margin for Q2 2024 was $38.0 million, or 38.7% of net sales, compared to $37.6 million, or 37.6% of net sales in Q2 2023[70] - Gross margin for the six months ended June 30, 2024, was $82.2 million, or 38.9% of net sales, compared to $81.3 million, or 38.7% of net sales in the prior year[83] - The company divested the Servus brand in Q1 2023, recording a gain of approximately $1.3 million[63] Cash Flow and Capital Expenditures - Net cash provided by operating activities was $23.9 million for the six months ended June 30, 2024, compared to $19.7 million in the same period of 2023[93] - Capital expenditures for the six months ended June 30, 2024, were $2.4 million, slightly up from $2.3 million in the prior year[89] Tax and Accounting - The effective tax rate for the six months ended June 30, 2024, was 23.4%, up from 20.9% in the prior year, primarily due to a shift in the mix of domestic and foreign earnings[87] - The company has identified critical accounting policies for estimates and assumptions in its Annual Report on Form 10-K for the year ended December 31, 2023[100] - There have been no material changes to the company's market risk as disclosed in Item 7A of the Annual Report on Form 10-K for the year ended December 31, 2023[102] - The company does not assume any obligation to update forward-looking statements, which involve risks and uncertainties[102] Cost-Saving Initiatives - The company implemented cost-saving initiatives in 2023, resulting in reduced operating expenses as a percentage of net sales[71]