Retail Sales Increased 21.8% to $14.5
Million
Net Income Per Share Increased 11.9% to
$0.75
Adjusted Net Income Per Share Increased
13.3% to $0.68
Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial
results for its third quarter ended September 30, 2019.
Third Quarter 2019 and Year-to-Date
Sales and Income
Third quarter net sales increased 2.0% to $67.2 million compared
to $65.9 million in the third quarter of 2018. The Company reported
third quarter net income of $5.6 million, or $0.75 per diluted
share compared to net income of $5.0 million, or $0.67 per diluted
share in the third quarter of 2018. Adjusted net income for the
third quarter of 2019 was $5.0 million, or $0.68 per diluted share
compared to adjusted net income of $4.5 million, or $0.60 per
diluted share in the prior year period.
Net sales for the first nine months of 2019 increased 5.2% to
$195.1 million compared with $185.5 million for the first nine
months of 2018. The Company reported net income of $12.4 million,
or $1.66 per diluted share and net income of $10.9 million, or
$1.47 per diluted share for the nine months ended September 30,
2019 and 2018, respectively. Adjusted net income for the first nine
months of 2019 was $11.8 million, or $1.59 per diluted share
compared to adjusted net income of $10.4 million, or $1.40 per
diluted share for the same period of 2018.
Jason Brooks, President and Chief Executive Officer, commented,
“We continue to have success capitalizing on the key growth
opportunities we have identified for our Company. Our retail
division is benefitting from the investments we have made in people
as well as systems & processes which are driving strong sales
increases across both our Lehigh CustomFit model and ecommerce
channels. At the same time, the focus we have placed on product
innovation, enhanced consumer engagement, and stronger retail
partnerships is fueling consistent gains for our wholesale business
led most recently by our western, outdoor and commercial military
categories. Importantly, we’ve been able to translate our top-line
results into even stronger bottom line performances through gross
margin expansion and our commitment to operational excellence.
While we now face some near-term headwinds due to the tariff
increase on footwear imports from China that went into effect in
September, we believe the strength of our brand portfolio, margin
enhancing growth prospects and internal manufacturing capabilities
have us well positioned to deliver increased profitability over the
long-term.”
Third Quarter and Year-to-Date
Review
Net sales for the third quarter increased 2.0% to $67.2 million
compared to $65.9 million a year ago. Wholesale sales for the third
quarter increased 0.4% to $47.2 million compared to $47.0 million
for the same period in 2018. Retail sales for the third quarter
increased 21.8% to $14.5 million compared to $11.9 million for the
same period last year. Military segment sales for the third quarter
decreased, as expected, to $5.4 million compared to $7.0 in the
third quarter of 2018.
Gross margin in the third quarter of 2019 increased to $25.0
million, or 37.2% of sales, compared to $22.4 million, or 34.0% of
sales, for the same period last year. The 320 basis point increase
was driven by a higher percentage of retail sales, which carry
higher gross margins than wholesale and military sales combined
with higher retail, wholesale and military margins. Third quarter
2019 gross margins also benefitted from a hurricane related expense
reimbursement, which contributed approximately 100 basis points to
the year-over-year improvement. Excluding the hurricane related
expense reimbursement, gross margin in the third quarter of 2019
was $24.3 million, or 36.2% of sales.
Operating expenses were $18.0 million, or 26.8% of net sales,
for the third quarter of 2019 compared to $16.8 million, or 25.5%
of net sales, a year ago. The increase in operating expenses was
primarily attributable to higher variable expenses associated with
the growth in retail sales.
Income from operations for the third quarter of 2019 was $7.0
million, or 10.4% of net sales compared to $5.6 million for the
same period a year ago, or 8.5% of net sales.
For the first nine months of 2019, wholesale sales increased
2.4% to $130.3 million compared to $127.2 million for the same
period in 2018. Retail sales for the first nine months increased
19.9% to $44.0 million compared to $36.7 million for the same
period last year. Military segment sales for the first nine months
decreased, as expected, to $20.8 million compared to $21.6 million
in the first nine months of 2018.
Gross margin in the first nine months of 2019 increased 10.3% to
$69.4 million, or 35.6% of sales, compared to $62.9 million, or
33.9% of sales, for the same period last year. Excluding the
hurricane related expense reimbursement gross margin for the first
nine months of 2019 was $68.7 million, or 35.2% of sales.
Operating expenses were $54.0 million, or 27.7% of net sales,
for the first nine months of 2019 compared to $49.7 million, or
26.8% of net sales, a year ago.
Income from operations for the first nine months of 2019
increased 16.7% to $15.4 million, or 7.9% of net sales compared to
$13.2 million for the same period a year ago, or 7.1% of net
sales.
Balance Sheet Review
Cash and cash equivalents increased $2.2 million or 52.4% to
$6.4 million at September 30, 2019 compared to $4.2 million on the
same date a year ago.
Inventory at September 30, 2019 increased 5.7% to $82.9 million
compared to $78.4 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 third quarter 2019
results will be broadcast live over the internet today, Wednesday,
October 23, 2019 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®.
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 headwinds
due to tariffs on footwear imports from China (paragraph 3) the
Company’s positioning to deliver expected increased profitability
over the long-term based on the Company’s belief in the strength of
its brand portfolio, margin enhancing growth prospects and internal
manufacturing capabilities (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, 2018 (filed March 13,
2019) and quarterly reports on Form 10-Q for the quarters ended
March 31, 2019 (filed May 9, 2019) and June 30, 2019 (filed August
8, 2019). 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
(In thousands, except share
amounts)
September 30,
December 31,
September 30,
2019
2018
2018
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents
$
6,440
$
10,173
$
4,210
Trade receivables, net
50,700
43,337
50,691
Contract receivables
2,036
2,602
4,849
Other receivables
310
331
282
Inventories – net
82,881
72,822
78,409
Income tax receivable
-
30
-
Prepaid expenses
2,656
1,890
2,122
Total current assets
145,023
131,185
140,563
LEASED ASSETS
1,781
-
-
PROPERTY, PLANT & EQUIPMENT – net
25,150
23,057
23,209
IDENTIFIED INTANGIBLES – net
30,248
30,273
30,283
OTHER ASSETS
293
148
163
TOTAL ASSETS
$
202,495
$
184,663
$
194,218
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable
$
20,531
$
13,543
$
20,622
Contract liabilities
1,936
2,602
4,849
Accrued expenses:
Salaries and wages
2,791
3,339
3,661
Taxes - other
624
556
158
Accrued freight
495
668
465
Commissions
488
560
432
Accrued duty
2,597
2,334
2,727
Income tax payable
19
-
1,888
Other
1,766
1,416
1,308
Total current liabilities
31,247
25,018
36,110
LONG-TERM TAXES PAYABLE
169
169
169
LONG-TERM LEASE
1,188
-
-
DEFERRED INCOME TAXES
7,780
7,780
7,726
DEFERRED LIABILITIES
230
121
152
TOTAL LIABILITIES
40,614
33,088
44,158
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and
outstanding September 30, 2019 - 7,403,219; December 31, 2018 -
7,368,494 and September 30, 2018 - 7,421,317
69,273
68,387
69,589
Retained earnings
92,608
83,188
80,471
Total shareholders' equity
161,881
151,575
150,060
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
202,495
$
184,663
$
194,218
Rocky Brands, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(In thousands, except share
amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
NET SALES
$
67,179
$
65,916
$
195,067
$
185,508
COST OF GOODS SOLD
42,165
43,516
125,633
122,610
GROSS MARGIN
25,014
22,400
69,434
62,898
OPERATING EXPENSES
18,027
16,791
54,004
49,688
INCOME FROM OPERATIONS
6,987
5,609
15,430
13,210
OTHER INCOME (EXPENSES)
43
31
160
(148)
INCOME BEFORE INCOME TAXES
7,030
5,640
15,590
13,062
INCOME TAX EXPENSE
1,414
595
3,212
2,117
NET INCOME
$
5,616
$
5,045
$
12,378
$
10,945
INCOME PER SHARE
Basic
$
0.76
$
0.68
$
1.67
$
1.48
Diluted
$
0.75
$
0.67
$
1.66
$
1.47
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic
7,400
7,418
7,392
7,412
Diluted
7,455
7,480
7,443
7,454
Rocky Brands, Inc. and
Subsidiaries
Reconciliation of GAAP
Measures to Non-GAAP Measures
(In thousands, except share
amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
Gross
Margin
Gross margin, as reported
$
25,014
$
22,400
$
69,434
$
62,898
Less: Hurricane related expense
reimbursement *
(725)
-
(725)
-
Adjusted gross margin
$
24,289
$
22,400
$
68,709
$
62,898
Operating
Expenses
$
18,027
$
16,791
$
54,004
$
49,688
INCOME FROM OPERATIONS, ADJUSTED
$
6,262
$
5,609
$
14,705
$
13,210
Net
Income
Net income, as reported
$
5,616
$
5,045
$
12,378
$
10,945
Less: Transition Tax Adjustment **
-
(561)
-
(561)
Less: Hurricane related expense
reimbursement, after tax
(579)
-
(579)
-
Adjusted net income
$
5,037
$
4,484
$
11,799
$
10,384
Net income per share, as reported
Basic
$
0.76
$
0.68
$
1.67
$
1.48
Diluted
$
0.75
$
0.67
$
1.66
$
1.47
Adjusted net income per share
Basic
$
0.68
$
0.60
$
1.60
$
1.40
Diluted
$
0.68
$
0.60
$
1.59
$
1.40
Weighted average shares outstanding
Basic
7,400
7,418
7,392
7,412
Diluted
7,455
7,480
7,443
7,454
* Adjustment related to reimbursements of expenses associated with
the temporary closure of our Puerto Rican manufacturing facility as
a result of Hurricane Maria in 2017 ** Adjustment related to the
one-time transition tax on the deemed repatriation of undistributed
foreign earnings as a result of further analysis of the provisions
of the Tax Cuts and Jobs Act.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191023005694/en/
Company: Tom Robertson Chief Financial Officer (740)
753-9100
Investor Relations: Brendon Frey ICR, Inc. (203) 682-8200
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