Rocky Brands, Inc. Announces Third Quarter 2017 Results
•Adjusted Earnings Per Share Increased to $0.39
--Funded Debt Decreased 62.5% to $11.6 Million
Rocky Brands, Inc. (RCKY) today announced financial results for
the 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 weve 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 Companys 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 Companys 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
Conference Call Information
The Companys 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(R), Georgia Boot(R), Durango(R),
Lehigh(R), Creative Recreation(R), and the licensed brand Michelin(R).
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 Companys business as set forth in
periodic reports filed with the Securities and Exchange Commission,
including the Companys 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
Companys 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
Cash and cash equivalents
Trade receivables - net
Income tax receivable
FIXED ASSETS - net
LIABILITIES AND SHAREHOLDERS EQUITY:
Accrued other expenses:
Total current liabilities
LONG TERM DEBT
DEFERRED INCOME TAXES
Common stock, no par value;
25,000,000 shares authorized; issued and outstanding
30, 2017 - 7,403,195; December 31, 2016 -
September 30, 2016 - 7,447,331
Total shareholders equity
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months Ended
Nine Months Ended
COST OF GOODS SOLD
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
TOTAL OPERATING EXPENSE
INCOME (LOSS) FROM OPERATIONS
OTHER INCOME AND (EXPENSES):
Other - net
Total other - net
INCOME (LOSS) BEFORE INCOME TAXES
INCOME TAX EXPENSE (BENEFIT)
NET INCOME (LOSS)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Rocky Brands, Inc. and Subsidiaries
Reconciliation of Gross Margin, Selling General Admin, Net Income
Three months ended
Nine months ended
Gross margin, as reported
Add: hurricane related expenses
Adjusted gross margin
Sales, general, and administrative, as reported
Less: reorganizational charge
Adjusted selling, general, and administrative expenses
Net income (loss), as reported
$ (1,505,150 )
Add: hurricane related expenses, after tax
Add: reorganizational charge, after tax
Adjusted net income (loss)
Net income (loss) per share, as reported
Adjusted net income (loss) per share
Weighted average shares outstanding
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SOURCE: Rocky Brands, Inc.
Tom Robertson, 740-753-1951
Brendon Frey, 203-682-8200