Rocky Brands(US:RCKY)2025-11-06 14:22Financial Performance - Net sales increased by 7.0% to $122.5 million in Q3 2025 compared to $114.6 million in Q3 2024, with growth across all reportable segments: Wholesale, Retail, and Contract Manufacturing [74]. - Year-to-date net sales for 2025 reached $342.3 million, a 5.1% increase from $325.7 million in 2024, primarily driven by growth in the Retail segment [80]. - Total net sales for the nine months ended September 30, 2025 were $342.3 million, a 5.1% increase from $325.7 million in the prior year, driven by increased demand in wholesale and retail segments [95]. - Retail net sales rose by 15.1% to $95.9 million for the nine months ended September 30, 2025, attributed to growth in the Lehigh CustomFit business and enhanced e-commerce sales [96]. - Wholesale segment net sales increased by 6.1% to $89.1 million in Q3 2025, attributed to higher demand and tariff-related price increases [84]. - Operating income for the nine months ended September 30, 2025, was $27.6 million, or 8.1% of net sales, compared to $22.6 million, or 6.9% of net sales, in the prior year [83]. Margins and Expenses - Gross margin improved by 210 basis points to 40.2% in Q3 2025, driven by favorable shifts in product mix and price increases, particularly in rubber-boot brands [74][77]. - Operating expenses increased to $37.5 million, or 30.6% of net sales, in Q3 2025, up from $33.6 million, or 29.3% of net sales, in Q3 2024, due to higher logistics and selling costs [78][91]. - Total operating expenses for the nine months ended September 30, 2025 were $112.0 million, representing 32.7% of net sales, an increase from 31.7% in the prior year [102]. - Wholesale gross margin increased to $94.8 million, or 40.0% of net sales, compared to $86.0 million, or 37.0% of net sales, for the same period last year, reflecting a favorable product mix [99]. Cash Flow and Debt - Net cash used in operating activities for the nine months ended September 30, 2025 was $1.3 million, a significant decrease from $28.4 million provided in the same period last year [111]. - An increase in inventory resulted in a cash use of $26.9 million for the nine months ended September 30, 2025, compared to $2.6 million in the prior year, driven by tariffs and anticipated demand [112]. - As of September 30, 2025, the company maintained cash and cash equivalents of $3.3 million and had $40.1 million available under its ABL Facility [106]. - Total debt decreased by 7.5% to $139.0 million as of September 30, 2025, reflecting continued debt repayments [74]. - Interest expense for the three months ended September 30, 2025 decreased to $2.5 million from $3.2 million in the prior year, a reduction of 21.6% due to lower debt levels and interest rates [92]. Tax and Legal Matters - Income tax expense increased by 25.9% to $2.0 million for the three months ended September 30, 2025, compared to $1.6 million in the same period last year [93]. - The effective tax rate decreased to 22.1% for the nine months ended September 30, 2025, down from 23.4% in the previous year, primarily due to the earnings mix between the U.S. and international subsidiaries [105]. - 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 [117]. Strategic Initiatives - The company is implementing sourcing shifts to leverage manufacturing facilities in the Dominican Republic and Puerto Rico to mitigate tariff impacts [68]. - A share repurchase program was announced on February 25, 2025, allowing for the repurchase of up to $7.5 million of the Company's outstanding common stock [116]. Accounting and Market Risk - The Company has identified critical accounting policies that impact estimates and assumptions in financial reporting, with historical results not materially differing from estimates [118]. - There have been no material changes to market risk as disclosed in the Annual Report for the year ended December 31, 2024 [121].