Rocky Brands(US:RCKY)2025-05-08 20:05Sales Performance - Net sales increased by 1.1% to $114.1 million in Q1 2025 compared to $112.9 million in Q1 2024, driven by growth in the Retail segment [84]. - Retail net sales grew by 20.5% to $36.6 million, while Wholesale net sales decreased by 6.3% to $74.8 million due to a prior year commercial military order [89]. Gross Margin and Operating Income - Gross margin improved by 210 basis points to 41.2%, with Wholesale gross margin increasing to 40.3% and Retail gross margin at 45.7% [83][85]. - Income from operations rose to $8.7 million, or 7.6% of net sales, compared to $8.0 million, or 7.1% of net sales in the prior year [87]. Operating Expenses and Interest - Operating expenses rose to $38.3 million, or 33.6% of net sales, reflecting higher selling and logistics costs associated with increased Retail sales [86]. - Interest expense decreased by 46.8% to $2.4 million due to lower interest rates following debt refinancing in April 2024 [97]. Debt and Liquidity - Total debt decreased by 17.5% to $128.6 million, contributing to reduced interest expenses [83]. - As of March 31, 2025, the company maintained cash and cash equivalents of $2.6 million and had $53.0 million available under its ABL Facility [99]. - As of March 31, 2025, the company has outstanding borrowings of $97.7 million under its ABL Facility and $33.0 million under its Term Facility, maintaining compliance with covenants and restrictions [101]. - The company anticipates that cash generated from operations will provide sufficient liquidity to fund operations and debt obligations for the next twelve months and beyond [103]. Cash Flow and Investments - Net cash provided by operating activities for the three months ended March 31, 2025, was $1.2 million, a significant decrease from $17.4 million for the same period in 2024 [104]. - The increase in inventory resulted in a cash use of $8.8 million for the three months ended March 31, 2025, compared to a cash source of $4.1 million for the same period in 2024 [105]. - The company reported a net cash used in financing activities of $1.7 million for the three months ended March 31, 2025, down from $18.5 million in the same period of 2024 [108]. - Net cash used in investing activities was $0.7 million for the three months ended March 31, 2025, compared to $0.3 million for the same period in 2024, primarily due to capital expenditures [107]. Shareholder Actions - A share repurchase program of up to $7.5 million of the company's outstanding common stock was announced on February 25, 2025 [109]. Tax and Accounting - The effective tax rate decreased to 22.2% from 23.4% due to changes in projected income from international operations [98]. - The company is contingently liable for lawsuits, taxes, and other matters arising in the normal course of business, with no off-balance sheet arrangements or related party transactions affecting financial results [110]. - The company has identified critical accounting policies that may affect the reported financial statements, with historical results not materially differing from estimates [111]. Inventory and Accounts Receivable - Inventory increased by 6.3% to $175.5 million as a strategic move to prepare for the latter half of 2025 [83]. - An increase in accounts receivable resulted in a cash use of $1.9 million for the three months ended March 31, 2025, compared to a cash source of $6.0 million for the same period in 2024 [106].