Rocky Brands, Inc. Announces Third Quarter 2015 Results

NELSONVILLE, Ohio--()--Rocky Brands, Inc. (NASDAQ:RCKY) today announced financial results for its third quarter ended September 30, 2015.

Third Quarter 2015 Sales and Income

Third quarter net sales were $70.0 million compared to $72.7 million in the third quarter of 2014. The Company reported third quarter net income of $1.8 million, or $0.24 per diluted share, compared to net income of $3.1 million, or $0.42 per diluted share, in the third quarter of 2014.

David Sharp, President and Chief Executive Officer, commented, “Our third quarter performance reflects softer than expected demand in our Work and Hunting categories. The combination of warm temperatures, challenging retail store traffic and weakening local economies tied to oil & gas production led to lower levels of reorders for many of our waterproof and insulated boot collections. This was partially offset by continued growth of our Durango brand and Commercial Military business combined with a significant sales increase in our lower margin, contract military segment. While we are disappointed in our overall results and are being cautious about the remainder of this year given current trends, we believe our entire brand portfolio remains healthy and that the slowdown in our top-line is temporary. We are confident that our product and distribution strategies will generate earnings growth in excess of sales growth over the long-term as our business model has recently demonstrated.”

Third Quarter Review

Net sales for the third quarter were $70.0 million compared to $72.7 million a year ago. Wholesale sales for the third quarter decreased 12.0% to $54.7 million compared to $62.1 million for the same period in 2014. Retail sales for the third quarter increased 8.4% to $10.3 million compared to $9.5 million for the same period last year. Military segment sales for the third quarter increased to $5.1 million compared to $1.1 million in the third quarter of 2014.

Gross margin in the third quarter of 2015 was $22.1 million, or 31.6% of sales, compared to $24.3 million, or 33.4% of sales, for the same period last year. The 180 basis point decrease was primarily due to the increase in military segment sales as a percentage of overall sales, which carry lower gross margins than wholesale and retail.

Selling, general and administrative (SG&A) expenses were $19.2 million, or 27.5% of net sales, for the third quarter of 2015 compared to $19.4 million, or 26.6% of net sales, a year ago.

Income from operations was $2.9 million, or 4.1% of net sales, compared to $4.9 million, or 6.8% of net sales, a year ago.

Interest expense was $188,000 for the third quarter of 2015, versus $253,000 for the same period last year.

The Company’s funded debt decreased $5.7 million, or 11.2%, to $45.0 million at September 30, 2015 compared to $50.7 million at September 30, 2014.

Inventories decreased $2.1 million, or 2.4%, to $88.0 million at September 30, 2015 compared with $90.1 million on the same date a year ago.

Conference Call Information

The Company’s conference call to review third quarter 2015 results will be broadcast live over the internet today, Wednesday October 21, 2015 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 the health of the brand (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, 2014 (filed February 27, 2015) and quarterly reports on Form 10-Q for the quarters ended March 31, 2015 (filed April 30, 2015) and June 30, 2015 (filed July 29, 2015. 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, 2015   December 31, 2014   September 30, 2014
Unaudited Audited Unaudited
ASSETS:
 
CURRENT ASSETS:
Cash and cash equivalents $ 3,978,553 $ 4,616,694 $ 4,327,710
Trade receivables – net 62,389,224 55,807,103 61,650,439
Other receivables 509,026 476,480 503,371
Inventories 87,996,325 85,237,042 90,115,460
Income tax receivable 215,736 - -
Deferred income taxes 1,291,287 1,291,907 1,137,429
Prepaid expenses   2,969,005   2,553,442   2,577,125
Total current assets 159,349,156 149,982,668 160,311,534
FIXED ASSETS – net 26,808,704 26,264,641 27,266,880
IDENTIFIED INTANGIBLES 36,581,475 36,681,644 36,707,473
OTHER ASSETS   261,766   299,490   267,041
TOTAL ASSETS $ 223,001,101 $ 213,228,443 $ 224,552,928
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
 
CURRENT LIABILITIES:
Accounts payable $ 15,623,738 $ 15,116,131 $ 18,829,425
Accrued expenses:
Taxes - other 389,712 532,470 443,172
Other   7,163,907   9,561,139   7,336,579
Total current liabilities 23,177,357 25,209,740 26,609,176
 
LONG TERM DEBT 45,030,998 36,270,373 50,687,596
DEFERRED INCOME TAXES 12,998,424 12,928,048 12,448,842
DEFERRED LIABILITIES   343,791   472,364   255,906
 
TOTAL LIABILITIES 81,550,570 74,880,525 90,001,520
 
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and outstanding September 30, 2015 - 7,564,313; December 31, 2014 - 7,550,126; September 30, 2014 - 7,546,654
 
70,762,851 70,460,672 70,380,692
Retained earnings   70,687,680   67,887,246   64,170,716
 
Total shareholders' equity   141,450,531   138,347,918   134,551,408
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 223,001,101 $ 213,228,443 $ 224,552,928

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

 
    Three Months Ended   Nine Months Ended
September 30, September 30,
  2015       2014     2015       2014  
NET SALES $ 70,001,496 $ 72,729,678 $ 204,035,995 $ 207,335,482
 
COST OF GOODS SOLD   47,884,019     48,455,886     137,298,575     138,622,879  
 
GROSS MARGIN 22,117,477 24,273,792 66,737,420 68,712,603
 
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES   19,217,222     19,363,984     58,180,467     59,920,806  
 
INCOME FROM OPERATIONS 2,900,255 4,909,808 8,556,953 8,791,797
 
OTHER INCOME AND (EXPENSES):
Interest expense (188,413 ) (252,972 ) (529,675 ) (696,944 )
Other – net   (37,885 )   (25,855 )   (96,701 )   (25,623 )
Total other - net (226,298 ) (278,827 ) (626,376 ) (722,567 )
 
INCOME BEFORE INCOME TAXES 2,673,957 4,630,981 7,930,577 8,069,230
 
INCOME TAX EXPENSE   870,290     1,492,474     2,710,290     2,695,474  
 
NET INCOME $ 1,803,667   $ 3,138,507   $ 5,220,287   $ 5,373,756  
 
INCOME PER SHARE
Basic $ 0.24 $ 0.42 $ 0.69 $ 0.71
Diluted $ 0.24 $ 0.42 $ 0.69 $ 0.71
 
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic   7,564,289     7,546,617     7,561,845     7,543,199  
Diluted   7,578,219     7,550,268     7,574,239     7,545,338  

Contacts

Rocky Brands, Inc.
Jim McDonald Chief Financial Officer
740-753-1951

Investor Relations:
ICR, Inc.
Brendon Frey, 203-682-8200

Contacts

Rocky Brands, Inc.
Jim McDonald Chief Financial Officer
740-753-1951

Investor Relations:
ICR, Inc.
Brendon Frey, 203-682-8200