ROCKY BRANDS, INC.
     
  Company Contact: Tom Robertson
    Chief Financial Officer
    (740) 753-1951
     
  Investor Relations:   ICR, Inc.
    Brendon Frey
    (203) 682-8200

  

  

                                                                                                    

 

Rocky Brands, Inc. Announces Third Quarter 2017 Results

Earnings Per Share Increased Fivefold to $0.30

Adjusted Earnings Per Share Increased to $0.39

Funded Debt Decreased 62.5% to $11.6 Million


 

NELSONVILLE, Ohio, October 24, 2017 – Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial results for its three and nine month periods ended September 30, 2017.

 

Sales & Income Review

Third quarter net sales were $64.7 million compared to $73.2 million in the third quarter of 2016. The Company reported third quarter net income of $2.2 million, or $0.30 per diluted share compared to net income of $0.4 million, or $0.06 per diluted share in the third quarter of 2016. Adjusted net income for the third quarter of 2017 was $2.8 million, or $0.39 per diluted share compared to adjusted net income of $1.2 million, or $0.16 per diluted share in the prior year period. 

Net sales for the first nine months of 2017 were $186.2 million compared to $193.3 million for the first nine months of 2016. The Company reported net income of $5.2 million, or $0.70 per diluted share compared to a net loss of $1.5 million, or ($0.20) per diluted share for the nine months ended September 30, 2017 and 2016, respectively. Adjusted net income for the first nine months of 2017 was $5.8 million, or $0.79 per diluted share compared to an adjusted net loss of $0.8 million, or ($0.10) per diluted share in the prior year period. 

 

Jason Brooks, President and Chief Executive Officer, commented, “We are pleased to have achieved another quarter of strong earnings growth. Our ability to drive enhanced profitability despite softer top-line trends highlights our improved operating structure and focus on increasing margins.  As we previously announced, approximately $1.7 million of military footwear shipments shifted from the third quarter to the fourth quarter due to the temporary shutdown of our Puerto Rico facility in the wake of Hurricane Maria. On top of this, wholesale sales were below expectations as each of our brands posted modest shortfalls versus plan. We believe this was due to a combination of factors including lower discounting as we’ve placed a greater emphasis on full-price selling and retailers buying closer to the holiday season compared with previous years.   We were able to offset a portion of these challenges through the expansion of our direct channel as we continue to sign new accounts to our Lehigh Outfitters CustomFit program.  Looking ahead, we are cautiously optimistic about our growth prospects beginning in the fourth quarter as wholesale sales trends have recently accelerated and our military manufacturing has resumed normal operations. We remain confident that our current strategies have the Company well positioned to deliver increased value to shareholders over the long-term.” 

Third Quarter Review

Net sales for the third quarter decreased 11.7% to $64.7 million compared to $73.2 million a year ago. Wholesale sales for the third quarter decreased 12.9% to $46.0 million compared to $52.9 million for the same period in 2016. Retail sales for the third quarter increased 7.8% to $11.1 million compared to $10.3 million for the same period last year. Military segment sales for the third quarter were $7.6 million compared to $10.1 million in the third quarter of 2016. 

Gross margin in the third quarter of 2017 was $19.5 million, or 30.2% of sales, compared to $19.8 million, or 27.0% of sales, for the same period last year. The 320 basis point increase was driven by a significant improvement in both wholesale segment and military segment margins. Third quarter 2017 gross margin includes approximately $1 million of additional expenses related to payroll and overhead costs that could not be capitalized in inventory due to lower than usual production volumes at the Company’s Puerto Rico manufacturing facility because of the disruption from Hurricanes Maria and Irma. Excluding the additional expenses, adjusted gross margin was 31.7%.

Selling, general and administrative (SG&A) expenses decreased to $16.0 million, or 24.8% of net sales, for the third quarter of 2017 compared to $18.9 million, or 25.8% of net sales, a year ago. Third quarter 2016 SG&A expenses included an approximately $1.2 million charge related to reorganizational activities.  Excluding the charge, the $1.7 million decrease in SG&A expenses was primarily related to lower compensation expense following the workforce reductions in the second half of 2016.

Income from operations for the quarter was $3.5 million, or 5.4% of net sales compared to income from operations of $0.9 million, or 1.2% of net sales a year ago.

Interest expense was $110,000 for the third quarter of 2017, versus $181,000 for the same period last year.

During the third quarter 2017, the company repurchased 48,616 shares of its common stock at an average price of $13.35.

The Company’s funded debt decreased $19.3 million, or 62.5% to $11.6 million at September 30, 2017 versus $31.0 million at September 30, 2016. 

Inventory at September 30, 2017 decreased 3.8% to $76.9 million compared to $79.9 million on the same date a year ago.

Use of Non-GAAP Financial Measures 

In addition to GAAP financial measures, we present the following non-GAAP financial measures: “non-GAAP adjusted gross margin,” “non-GAAP adjusted selling, general, and administrative expenses,” “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 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.

Conference Call Information

The Company’s conference call to review third quarter 2017 results will be broadcast live over the internet today, Tuesday, October 24, 2017 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 growth prospects and delivery of increased value to shareholders (paragraph 4). 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, 2016 (filed March 9, 2017) and quarterly report on Form 10-Q for the quarters ended March 31, 2017 (filed May 5, 2017) and June 30, 2017 (filed August 9, 2017). 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

 

   
September 30, 2017
 
December 31, 2016
 
September 30, 2016
   
Unaudited
 
Audited
 
Unaudited
             
ASSETS:                  
                   
CURRENT ASSETS:                  
Cash and cash equivalents   $2,238,862    $4,480,505    $3,942,209 
Trade receivables – net    45,106,205     40,844,583     51,292,323 
Other receivables    800,322     688,251     579,976 
Inventories    76,885,153     69,168,442     79,922,305 
Income tax receivable    -     1,243,678     1,190,702 
Prepaid expenses    2,431,996     2,354,107     2,644,102 
Total current assets    127,462,538     118,779,566     139,571,617 
FIXED ASSETS – net    24,742,833     26,511,493     27,450,150 
IDENTIFIED INTANGIBLES    33,319,334     33,415,694     36,448,490 
OTHER ASSETS    225,310     232,509     238,251 
TOTAL ASSETS   $185,750,015    $178,939,262    $203,708,508 
                   
LIABILITIES AND SHAREHOLDERS' EQUITY:                  
                   
CURRENT LIABILITIES:                  
Accounts payable   $16,861,274    $11,589,040    $15,042,805 
Accrued other expenses:    9,097,184     6,130,871     8,604,611 
Total current liabilities    25,958,458     17,719,911     23,647,416 
                  
LONG TERM DEBT    11,630,000     14,584,008     30,972,398 
DEFERRED INCOME TAXES    10,464,435     11,365,800     12,120,693 
DEFERRED LIABILITIES    181,737     176,219     208,387 
                   
TOTAL LIABILITIES    48,234,630     43,845,938     66,948,894 
                   
SHAREHOLDERS' EQUITY:                  
Common stock, no par value;                  
25,000,000 shares authorized; issued and outstanding   September 30, 2017 - 7,403,195; December 31, 2016 - 7,421,455; September 30, 2016 - 7,447,331    68,979,376     69,291,637     69,507,320 
Retained earnings    68,536,009     65,801,687     67,252,294 
                   
Total shareholders' equity    137,515,385     135,093,324     136,759,614 
                   
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $185,750,015    $178,939,262    $203,708,508 

  


 

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

 

   
Three Months Ended
 
Nine Months Ended   
   
September 30, 
 
September 30,
   
2017
 
2016
 
2017 
 
2016 
   
Unaudited
 
Unaudited
 
 Unaudited
 
Unaudited 
                 
NET SALES   $64,675,082    $73,218,247    $186,202,989    $193,308,286 
                         
COST OF GOODS SOLD    45,163,539     53,452,487     128,779,845     138,368,374 
                         
GROSS MARGIN    19,511,543     19,765,760     57,423,144     54,939,912 
                         
SELLING, GENERAL AND                        
ADMINISTRATIVE EXPENSES    16,026,654     17,745,691     49,313,498     55,685,180 
REORGANIZATIONAL CHARGE    -     1,159,527     -     1,159,527 
 TOTAL OPERATING EXPENSE    16,026,654     18,905,218     49,313,498     56,844,707 
                         
INCOME (LOSS) FROM OPERATIONS    3,484,889     860,542     8,109,646     (1,904,795)
                         
OTHER INCOME AND (EXPENSES):                        
Interest expense, net    (110,335)    (181,040)    (280,824)    (459,231)
Other, net    12,208     (3,873)    35,064     82,876 
Total other income and (expenses), net    (98,127)    (184,913)    (245,760)    (376,355)
                         
INCOME (LOSS) BEFORE INCOME TAXES    3,386,762     675,629     7,863,886     (2,281,150)
                         
INCOME TAX EXPENSE (BENEFIT)    1,152,000     230,000     2,674,000     (776,000)
                         
NET INCOME (LOSS)   $2,234,762    $445,629    $5,189,886    $(1,505,150)
                         
INCOME (LOSS) PER SHARE                        
Basic   $0.30    $0.06    $0.70    $(0.20)
Diluted   $0.30    $0.06    $0.70    $(0.20)
                         
WEIGHTED AVERAGE NUMBER OF                        
    COMMON SHARES OUTSTANDING                        
Basic    7,357,000     7,480,733     7,441,000     7,531,308 
Diluted    7,362,088     7,504,521     7,414,317     7,531,308 

 

 


 

Rocky Brands, Inc. and Subsidiaries 

Reconciliation of Gross Margin, Selling General Admin, Net Income (Loss)

   
Three months ended
 
Nine months ended
   
September 30,
 
September 30,
   
2017
 
2016
 
2017
 
2016
                 
Gross Margin                         
Gross margin, as reported   $19,511,543    $19,765,760    $57,423,144    $54,939,912 
Add: hurricane related expenses    963,570     -     963,570     - 
Adjusted gross margin   $20,475,113    $19,765,760    $58,386,714    $54,939,912 
                         
Operating Expenses                        
Sales, general, and administrative, as reported   $16,026,654    $18,905,218   $49,313,498    $56,844,707 
Less: reorganizational charge    -     1,159,527     -     1,159,527 
Adjusted selling, general, and administrative expenses   $16,026,654    $17,745,691    $49,313,498    $55,685,180 
                         
Net Income (Loss)                        
Net income (loss), as reported   $2,234,762    $445,629    $5,189,886    $(1,505,150)
Add: hurricane related expenses, after tax    635,956     -     635,956     - 
Add: reorganizational charge, after tax    -     753,693     -     753,693 
Adjusted net income   $2,870,718    $1,199,322    $5,825,842    $(751,457)
                         
Net income (loss) per share, as reported                        
Basic   $0.30    $0.06    $0.70    $(0.20)
Diluted   $0.30    $0.06    $0.70    $(0.20)
                         
Adjusted net income (loss) per share                        
Basic   $0.39    $0.16    $0.79    $(0.10)
Diluted   $0.39    $0.16    $0.79    $(0.10)
                         
Weighted average shares outstanding                        
Basic    7,357,000     7,480,733     7,411,000     7,531,308 
Diluted    7,362,088     7,504,521     7,414,317     7,531,308