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ROCKY BRANDS, INC.

Rocky Brands, Inc. Announces 2020 Second Quarter Results

Second Quarter Diluted Earnings Per Share of $0.33

Retail Sales Increased 15.8% to $16.3 Million

Cash Flow from Operations Increased by  $4.7 Million

Company had Cash and Cash Equivalents of $25.8 Million and Zero Debt at June 30, 2020





NELSONVILLE, Ohio, July 28, 2020 – Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial results for its second quarter ended June 30, 2020.



Second Quarter 2020 and Year-to-Date Sales and Income

Second quarter net sales were $56.2 million compared to $62.0 million in the second quarter of 2019. The Company reported second quarter net income of $2.4 million, or $0.33 per diluted share compared to net income of $3.2 million, or $0.42 per diluted share in the second quarter of 2019. Adjusted net income for the second quarter of 2020, which excludes expenses related to the temporary closure of the Company’s manufacturing facilities due to COVID-19, was $3.2 million, or $0.44 per diluted share.



Net sales for the first six months of 2020 were $111.9 million compared with $127.9 million for the first six months of 2019. The Company reported net income of $3.6 million, or $0.49 per diluted share, and net income of $6.8 million, or $0.91 per diluted share for the six months ended June 30, 2020 and 2019, respectively. Adjusted net income for the first six months of 2020, which excludes expenses related to the temporary closure of the Company’s manufacturing facilities due to COVID-19, was $5.2 million, or $0.71 per diluted share.



Jason Brooks, President and Chief Executive Officer, commented, “Our business exhibited increasing strength as the quarter progressed despite the ongoing challenges created by COVID-19. The work we’ve done over the past several years strengthening our brands and product lines, enhancing our marketing programs and building out our digital capabilities has allowed us to capitalize on the accelerated shift in consumer spending online brought on by the pandemic. Between our branded websites and online marketplaces, total digital sales increased triple digits on a percentage basis in the second quarter driven by existing customers and a dramatic increase in new customer acquisition. Meanwhile, the strong relationships we have forged with our key wholesale accounts helped us weather the slowdown at brick and mortar retail from reduced traffic and store closures.  As lockdown restrictions began to ease in many areas of the country midway through the second quarter, we experienced a significant pick up in weekly sell-through at retail. Given the circumstances, we are pleased with our recent performance and encouraged as this momentum has carried into July. While there is still uncertainty about the ultimate impact that COVID-19 will have on our industry and the overall economy, I am confident that our business model and balance sheet, which featured over $25 million in cash and cash equivalents and no debt at the end of the second quarter, have Rocky Brands well positioned to navigate the current headwinds and emerge from the pandemic poised for long-term success.”



Second Quarter Review

Net sales for the second quarter declined 9.3% to $56.2 million compared to $62.0 million a year ago. Wholesale sales for the second quarter declined 15.6% to $34.3 million compared to $40.6 million for the same period in 2019. Retail sales for the second quarter increased 15.8% to $16.3 million compared to $14.1 million for the same period last year. Military segment sales for the second quarter were $5.6 million compared to $7.2 million in the second quarter of 2019.



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Gross margin in the second quarter of 2020 was $19.5 million, or 34.6% of sales, compared to $21.4 million, or 34.6% of sales, for the same period last year. Adjusted gross margin for the second quarter of 2020, which excludes approximately $1.0 million in expenses related to the temporary closure of the Company’s manufacturing facilities due to COVID-19, was $20.4 million, or 36.4% of sales. The 180 basis point increase was driven primarily by a higher percentage of retail sales, which carry higher gross margins than wholesale and military sales, and higher retail margins year over year, partially offset by lower wholesale and military margins compared to 2019



Operating expenses were $16.4 million, or 29.1% of net sales, for the second quarter of 2020 compared to $17.5 million, or 28.2% of net sales, a year ago. The decrease in operating expenses was driven primarily by lower variable expenses associated with the decrease in sales.



Income from operations for the second quarter of 2020 was $3.1 million, or 5.5% of net sales compared to $3.9 million for the same period a year ago, or 6.4% of net sales. Adjusted operating income for the second quarter of 2020 was $4.1 million, or 7.3% of net sales.



Balance Sheet Review



Cash and cash equivalents increased $10.1 million, or 64.4%, to $25.8 million at June 30, 2020 compared to $15.7 million on the same date a year ago. During the second quarter of 2020, the Company repaid the $20 million it drew down on its credit facility in March 2020 as a precautionary measure in response to COVID-19. As of June 30, 2020, the Company had zero debt and $60 million in available borrowings on its credit facility. 



Inventory at June 30, 2020 decreased 3.8% to $74.5 million compared to $77.5 million on the same date a year ago.



Use of Non-GAAP Financial Measures

In addition to GAAP financial measures, the Company presents the following non-GAAP financial measures: “adjusted net income,” “adjusted net income per share” and “adjusted gross margin.” Adjusted results exclude the impact of items that management of the Company believes affect the comparability or underlying business trends in its consolidated financial statements in the periods presented.  The Company believes 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. The Company believes they also provide a useful baseline for analyzing trends in its 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 second quarter 2020 results will be broadcast live over the internet today, Tuesday, July 28, 2020 at 4:30 pm Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 705-6003 (domestic) or (201) 493-6725 (international). The conference call will also be available to interested parties through a live webcast at www.rockybrands.com. Please visit the website and select the “Investors” link at least 15 minutes prior to the start of the call to register and download any necessary software.



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®, and the licensed brand Michelin®.





















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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 the Company’s ability to face near-term challenges related to the COVID-19 pandemic (paragraph 4), the Company’s ability to sustain its recent momentum in performance (paragraph 4), and the Company’s positioning to navigate current headwinds and emerge from the pandemic poised for long-term success (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, 2019 (filed March 6, 2020) and quarterly report on Form 10-Q for the quarter ended March 31, 2020 (filed May 7, 2020). 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.





 

 

 

Company Contact:

Tom Robertson



Chief Financial Officer



(740) 753-9100



 

Investor Relations: 

Brendon Frey



ICR, Inc.



(203) 682-8200





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Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)







 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

June 30,

 

December 31,

 

June 30,



 

 

2020

 

2019

 

2019

ASSETS:

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

25,832 

$

15,518 

$

15,715 

Trade receivables – net

 

 

35,362 

 

45,585 

 

40,910 

Contract receivables

 

 

1,254 

 

4,746 

 

1,959 

Other receivables

 

 

402 

 

366 

 

152 

Inventories – net

 

 

74,546 

 

76,731 

 

77,458 

Income tax receivable

 

 

 -

 

150 

 

1,361 

Prepaid expenses

 

 

3,358 

 

3,030 

 

2,819 

Total current assets

 

 

140,754 

 

146,126 

 

140,374 

LEASED ASSETS

 

 

1,554 

 

1,743 

 

1,282 

PROPERTY, PLANT & EQUIPMENT – net

 

 

28,450 

 

27,423 

 

24,041 

IDENTIFIED INTANGIBLES – net

 

 

30,224 

 

30,240 

 

30,256 

OTHER ASSETS

 

 

348 

 

294 

 

279 

TOTAL ASSETS

 

$

201,330 

$

205,826 

$

196,232 



 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

Accounts payable

 

$

15,962 

$

15,776 

$

20,182 

Contract liabilities

 

 

1,254 

 

4,746 

 

1,959 

Accrued expenses:

 

 

 

 

 

 

 

Salaries and wages

 

 

1,304 

 

3,044 

 

2,100 

Taxes - other

 

 

778 

 

967 

 

667 

Accrued freight

 

 

417 

 

867 

 

476 

Commissions

 

 

392 

 

608 

 

491 

Accrued duty

 

 

3,954 

 

3,824 

 

2,603 

Other

 

 

2,176 

 

1,702 

 

1,767 

     Total current liabilities

 

 

26,237 

 

31,534 

 

30,245 

LONG-TERM TAXES PAYABLE

 

 

169 

 

169 

 

169 

LONG-TERM LEASE

 

 

967 

 

1,158 

 

776 

DEFERRED INCOME TAXES

 

 

8,108 

 

8,108 

 

7,780 

DEFERRED LIABILITIES

 

 

219 

 

201 

 

221 

TOTAL LIABILITIES

 

 

35,700 

 

41,170 

 

39,191 

SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

 

Common stock, no par value;

 

 

 

 

 

 

 

25,000,000 shares authorized; issued and outstanding June 30, 2020 7,312,217; December 31, 2019 - 7,354,970 and June 30, 2019 - 7,393,851

 

 

67,390 

 

67,993 

 

69,013 

Retained earnings

 

 

98,240 

 

96,663 

 

88,028 

Total shareholders' equity

 

 

165,630 

 

164,656 

 

157,041 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

201,330 

$

205,826 

$

196,232 









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Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except share amounts)

















 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2020

 

2019

 

2020

 

2019

NET SALES

$

56,186 

$

61,959 

$

111,905 

$

127,888 

COST OF GOODS SOLD

 

36,724 

 

40,518 

 

73,124 

 

83,469 

GROSS MARGIN

 

19,462 

 

21,441 

 

38,781 

 

44,419 



 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

16,363 

 

17,498 

 

34,169 

 

35,976 



 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

3,099 

 

3,943 

 

4,612 

 

8,443 



 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

(48)

 

52 

 

(57)

 

117 



 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

3,051 

 

3,995 

 

4,555 

 

8,560 



 

 

 

 

 

 

 

 

INCOME TAX EXPENSE

 

609 

 

839 

 

925 

 

1,798 



 

 

 

 

 

 

 

 

NET INCOME

$

2,442 

$

3,156 

$

3,630 

$

6,762 



 

 

 

 

 

 

 

 

INCOME PER SHARE

 

 

 

 

 

 

 

 

Basic

$

0.33 

$

0.43 

$

0.50 

$

0.92 

Diluted

$

0.33 

$

0.42 

$

0.49 

$

0.91 

WEIGHTED AVERAGE NUMBER OF

 

 

 

 

 

 

 

 

COMMON SHARES OUTSTANDING

 

 

 

 

 

 

 

 

Basic

 

7,312 

 

7,388 

 

7,332 

 

7,388 

Diluted

 

7,334 

 

7,431 

 

7,360 

 

7,436 





















































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Rocky Brands, Inc. and Subsidiaries

Reconciliation of GAAP Measures to Non-GAAP Measures

(In thousands, except share amounts)











 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2020

 

2019

 

2020

 

2019

GROSS MARGIN

 

 

 

 

 

 

 

 

GROSS MARGIN, AS REPORTED

$

19,462 

$

21,441 

$

38,781 

$

44,419 

ADD: MANUFACTURING EXPENSES RELATED TO COVID-19 CLOSURES/SUPPLIES*

 

986 

 

 -

 

1,974 

 

 -

ADJUSTED GROSS MARGIN

$

20,448 

$

21,441 

$

40,755 

$

44,419 



 

 

 

 

 

 

 

 

OPERATING EXPENSES

$

16,363 

$

17,498 

$

34,169 

$

35,976 



 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS, ADJUSTED

$

4,085 

$

3,943 

$

6,586 

$

8,443 



 

 

 

 

 

 

 

 

OTHER INCOME AND (EXPENSES):

 

(48)

 

52 

 

(57)

 

117 



 

 

 

 

 

 

 

 

NET INCOME

 

 

 

 

 

 

 

 

NET INCOME, AS REPORTED

$

2,442 

$

3,156 

$

3,630 

$

6,762 

ADD: MANUFACTURING EXPENSES RELATED TO COVID-19 CLOSURES/SUPPLIES, AFTER TAX

 

789 

 

 -

 

1,570 

 

 -

ADJUSTED NET INCOME

$

3,231 

$

3,156 

$

5,200 

$

6,762 



 

 

 

 

 

 

 

 

NET INCOME PER SHARE, AS REPORTED

 

 

 

 

 

 

 

 

BASIC

$

0.33 

$

0.43 

$

0.50 

$

0.92 

DILUTED

$

0.33 

$

0.42 

$

0.49 

$

0.91 



 

 

 

 

 

 

 

 

ADJUSTED NET INCOME PER SHARE

 

 

 

 

 

 

 

 

BASIC

$

0.44 

$

0.43 

$

0.71 

$

0.92 

DILUTED

$

0.44 

$

0.42 

$

0.71 

$

0.91 



 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

BASIC

 

7,312 

 

7,388 

 

7,332 

 

7,388 

DILUTED

 

7,334 

 

7,431 

 

7,360 

 

7,436 



















*  Adjustment related to the overhead, payroll expenses and supplies incurred during the temporary closure of our manufacturing facilities due to COVID-19.



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