Rocky Brands, Inc. Announces Second Quarter 2016 Results

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Funded Debt Decreased 34.0% to $23.5 Million

NELSONVILLE, Ohio--(BUSINESS WIRE)-- Rocky Brands, Inc. (NASDAQ:RCKY) today announced financial results for its second quarter ended June 30, 2016.

Second Quarter 2016 Sales and Income

Second quarter net sales were $62.6 million compared to $68.6 million in the second quarter of 2015. The Company reported a second quarter net loss of $1.8 million, or $0.23 per diluted share compared to net income of $2.0 million, or $0.26 per diluted share in the second quarter of 2015.

David Sharp, President and Chief Executive Officer, commented, “Much as they did in the first quarter, elevated inventories in the Western, Work, and Hunting channels negatively impacted sales and margins in our wholesale business. Softening of local economies, especially those where oil and gas exploration had been significant, and weak store traffic across retail contributed to our poor performance. The wholesale sales decline was partially offset by a significant gain in our military sales. However, our need to ramp up our internal production capabilities to meet the increase in military footwear demand resulted in additional costs, including labor and training that has temporarily pressured gross margins. While we are disappointed in our recent results, we continue to be confident that the strategic course we’ve set for the company will lead to improved profitability and greater shareholder value over the long-term.”

Second Quarter Review

Net sales for the second quarter were $62.6 million compared to $68.6 million a year ago. Wholesale sales for the second quarter decreased 23% to $41.5 million compared to $53.9 million for the same period in 2015. Retail sales for the second quarter increased 2% to $10.4 million compared to $10.2 million for the same period last year. Military segment sales for the second quarter increased 139% to $10.7 million compared to $4.5 million in the second quarter of 2015.

Gross margin in the second quarter of 2016 was $16.3 million, or 26.0% of sales, compared to $22.6 million, or 33.0% of sales, for the same period last year. The 700 basis point decrease was primarily driven by increased costs related to the ramp up in production capabilities to meet the increased military footwear demand. Also, military segment sales carry lower initial gross margins than our wholesale and retail segments, therefore the increase in military segment sales in the quarter reduced the overall blended margin.

Selling, general and administrative (SG&A) expenses were $18.8 million, or 30.1% of net sales, for the second quarter of 2016 compared to $19.4 million, or 28.3% of net sales, a year ago. The $0.6 million decrease in SG&A expenses was primarily related to lower variable expenses associated with the decrease in wholesale sales.

Loss from operations was $2.5 million compared to income from operations of $3.3 million, or 4.7%, of net sales, a year ago.

Interest expense was $142,000 for the second quarter of 2016, versus $176,000 for the same period last year.

The Company’s funded debt decreased $12.1 million, or 34.0%, to $23.5 million at June 30, 2016 versus $35.6 million at June 30, 2015.

Inventory at June 30, 2016 was $87.6 million compared with $86.5 million on the same date a year ago. The slight increase in inventories year-over-year was driven by the buildup of raw materials ahead of the ramp up in military footwear production and lower than anticipated wholesale sales in the second quarter. The company is comfortable with the quality of its inventories.

Conference Call Information

The Company’s conference call to review second quarter 2016 results will be broadcast live over the internet today, Thursday, July 28, 2016 at 4:30 pm Eastern Time. The broadcast will be hosted at http://www.rockybrands.com.

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 including Rocky®, Georgia Boot®, Durango®, Lehigh®, Creative Recreation®, and the licensed brand Michelin®.

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 improved profitability and increased shareholder value (paragraph 3). 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, 2015 (filed March 3, 2016) and quarterly report on Form 10-Q for the period ended March 31, 2016 (filed April 29, 2016). 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 Company, or any other person should not regard the inclusion of such information as a representation 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

 
    June 30, 2016   December 31, 2015   June 30, 2015
Unaudited Audited Unaudited
ASSETS:
 
CURRENT ASSETS:
Cash and cash equivalents $ 2,470,576 $ 3,407,140 $ 4,526,938
Trade receivables – net 42,188,601 44,549,207 58,073,165
Other receivables 587,779 583,479 605,019
Inventories 87,555,956 76,991,059 86,478,155
Income tax receivable 2,179,525 128,699 56,540
Deferred income taxes 1,031,818 1,031,818 1,291,907
Prepaid expenses   2,886,973   2,530,517   2,672,643
Total current assets 138,901,228 129,221,919 153,704,367
FIXED ASSETS – net 27,896,273 27,836,527 25,258,833
IDENTIFIED INTANGIBLES 36,481,414 36,547,873 36,615,202
OTHER ASSETS   245,934   258,812   269,620
TOTAL ASSETS $ 203,524,849 $ 193,865,131 $ 215,848,022
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
 
CURRENT LIABILITIES:
Accounts payable $ 21,892,208 $ 9,118,555 $ 19,436,481
Accrued other expenses   7,380,567   5,629,661   7,117,467
Total current liabilities 29,272,775 14,748,216 26,553,948
 
LONG TERM DEBT 23,503,226 23,700,089 35,593,360
DEFERRED INCOME TAXES 13,000,609 13,000,609 12,928,048
DEFERRED LIABILITIES   227,345   295,676   389,208
 
TOTAL LIABILITIES 66,003,955 51,744,590 75,464,564
 
SHAREHOLDERS' EQUITY:
Common stock, no par value;

25,000,000 shares authorized; issued and outstanding June
30, 2016 - 7,481,022; December 31, 2015 - 7,567,271; June
30, 2015 - 7,562,069

 
69,890,665 70,882,392 70,667,372
Retained earnings   67,630,229   71,238,149   69,716,086
 
Total shareholders' equity   137,520,894   142,120,541   140,383,458
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 203,524,849 $ 193,865,131 $ 215,848,022
 
 

Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations

 
    Three Months Ended   Six Months Ended
June 30, June 30,
2016   2015 2016   2015
NET SALES $ 62,560,094 $ 68,583,196 $ 120,090,039 $ 134,034,499
 
COST OF GOODS SOLD   46,296,834     45,934,563     84,915,887     89,414,556  
 
GROSS MARGIN 16,263,260 22,648,633 35,174,152 44,619,943
 
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES   18,807,595     19,395,298     37,939,489     38,963,245  
 
INCOME FROM OPERATIONS (2,544,335 ) 3,253,335 (2,765,337 ) 5,656,698
 
OTHER INCOME AND (EXPENSES):
Interest expense (142,215 ) (176,186 ) (278,191 ) (341,262 )
Other – net   19,221     4,524     86,749     (58,816 )
Total other - net (122,994 ) (171,662 ) (191,442 ) (400,078 )
 
INCOME BEFORE INCOME TAXES (2,667,329 ) 3,081,673 (2,956,779 ) 5,256,620
 
INCOME TAX EXPENSE   (908,000 )   1,079,000     (1,006,000 )   1,840,000  
 
NET INCOME $ (1,759,329 ) $ 2,002,673   $ (1,950,779 ) $ 3,416,620  
 
INCOME PER SHARE
Basic $ (0.23 ) $ 0.26 $ (0.26 ) $ 0.45
Diluted $ (0.23 ) $ 0.26 $ (0.26 ) $ 0.45
 
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic   7,530,579     7,561,850     7,556,873     7,560,603  
Diluted   7,530,579     7,578,713     7,556,873     7,572,467  
 

Company:
Rocky Brands, Inc.
Jim McDonald, 740-753-1951
Chief Financial Officer
or
Investor Relations:
ICR, Inc.
Brendon Frey, 203-682-8200

Source: Rocky Brands, Inc.

Released July 28, 2016