NELSONVILLE, Ohio--(BUSINESS WIRE)--Rocky Brands, Inc. (NASDAQ: 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 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|
|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|
|Income tax receivable||-||1,243,678||1,190,702|
Total current assets
|FIXED ASSETS – net||24,742,833||26,511,493||27,450,150|
|LIABILITIES AND SHAREHOLDERS' EQUITY:|
|Accrued other expenses:||9,097,184||6,130,871||8,604,611|
Total current liabilities
|LONG TERM DEBT||11,630,000||14,584,008||30,972,398|
|DEFERRED INCOME TAXES||10,464,435||11,365,800||12,120,693|
|Common stock, no par value;|
25,000,000 shares authorized; issued and outstanding
Total shareholders' equity
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY||$||185,750,015||$||178,939,262||$||203,708,508|
|Rocky Brands, Inc. and Subsidiaries|
|Condensed Consolidated Statements of Operations|
|Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
|COST OF GOODS SOLD||45,163,539||53,452,487||128,779,845||138,368,374|
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
|TOTAL OPERATING EXPENSE||16,026,654||18,905,218||49,313,498||56,844,707|
|INCOME (LOSS) FROM OPERATIONS||3,484,889||860,542||8,109,646||(1,904,795||)|
|OTHER INCOME AND (EXPENSES):|
|Other – net||12,208||(3,873||)||35,064||82,876|
|Total other - net||(98,127||)||(184,913||)||(245,760||)||(376,355||)|
|INCOME (LOSS) BEFORE INCOME TAXES||3,386,762||675,629||7,863,886||(2,281,150||)|
|INCOME TAX EXPENSE (BENEFIT)||1,152,000||230,000||2,674,000||(776,000||)|
|NET INCOME (LOSS)||$||2,234,762||$||445,629||$||5,189,886||$||(1,505,150||)|
|INCOME (LOSS) PER SHARE|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|Rocky Brands, Inc. and Subsidiaries|
|Reconciliation of Gross Margin, Selling General Admin, Net Income (Loss)|
|Three months ended||Nine months ended|
|September 30,||September 30,|
|Gross margin, as reported||$||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||$||54,939,912|
|Sales, general, and administrative, as reported||$||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||$||(1,505,150||)|
|Add: hurricane related expenses, after tax||635,956||-||635,956||-|
|Add: reorganizational charge, after tax||-||753,693||-||753,693|
|Adjusted net income (loss)||$||2,870,718||$||1,199,322||$||5,825,842||$||(751,457||)|
|Net income (loss) per share, as reported|
|Adjusted net income (loss) per share|
|Weighted average shares outstanding|