Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial
results for its first quarter ended March 31, 2020.
First Quarter 2020 Sales and
Income First quarter net sales were $55.7 million
compared with $65.9 million in the first quarter of 2019. The
Company reported first quarter net income of $1.2 million, or $0.16
per diluted share compared to net income of $3.6 million, or $0.48
per diluted share in the first quarter of 2019. Adjusted net income
for the first quarter of 2020, which excludes expenses related to
the closure of the Company’s manufacturing facilities due to
COVID-19, was $2.0 million, or $0.27 per diluted share.
Jason Brooks, President and Chief Executive Officer, commented,
“Our business is holding up well despite one of the most difficult
operating environments in our company’s long history. We entered
2020 with good momentum thanks to the multi-year execution of
strategic initiatives that have enhanced our brands’ positioning in
the marketplace, strengthened our relationships with our consumers
and retail customers, and fortified our balance sheet. While we
face challenges due to the COVID-19 pandemic, particularly within
our brick and mortar wholesale channel as much of the country
continues to shelter-at-home, we have taken decisive actions to
capitalize on our digital and distribution center capabilities and
increase liquidity. Over the past several weeks, we’ve experienced
an acceleration in sales on our ecommerce sites as well as an
uptick in new account growth for our online Lehigh CustomFit safety
shoe business as many of our consumers work in critical industries
that are keeping America running during this crisis. As Rocky
Brands has done in the past, I am confident that we will weather
this storm and emerge in a position to resume delivering sustained
growth, increased profitability and enhanced value for our
shareholders.”
COVID-19 Update Below is a
summary of the current status of Rocky Brands’ operations and the
actions taken to mitigate the financial impact of COVID-19 and
preserve liquidity to-date.
- The Company’s 200,000 square-foot distribution center in Logan,
Ohio has remained open and fully operational.
- The Company’s manufacturing facilities in Puerto Rico and the
Dominican Republic have reopened following temporary government
mandated shutdowns and are currently operating at a reduced
capacity.
- The Company has reduced operating expenses by approximately
$1.5 million for the year.
- The Company has delayed approximately $15 million in planned
inventory receipts from third party suppliers.
- The Company drew down $20 million on its credit facility as a
precautionary measure. As of March 31, 2020, the Company had $44.2
million in cash and cash equivalents and $40 million in available
borrowings on its credit facility.
- The Company has suspended all share repurchases
indefinitely.
First Quarter Review Net
sales for the first quarter were $55.7 million compared to $65.9
million a year ago. Wholesale sales for the first quarter were
$35.0 million compared to $42.4 million for the same period in
2019. Retail sales for the first quarter increased 9.4% to $16.9
million compared to $15.4 million for the same period last year.
Military segment sales for the first quarter were $3.8 million
compared to $8.1 million in the first quarter of 2019.
Gross margin in the first quarter of 2020 was $19.3 million, or
34.7% of sales, compared to $23.0 million, or 34.9% of sales, for
the same period last year. Adjusted gross margin, which excludes
approximately $1.0 million in expenses related to the closure of
the Company’s manufacturing facilities due to COVID-19, was $20.3
million, or 36.4%. The 150 basis point increase in adjusted gross
margin was driven primarily by higher percentage of retail sales,
which carry higher gross margins than wholesale and military sales,
partially offset by lower wholesale and military margins.
Operating expenses were $17.8 million, or 32.0% of net sales,
for the first quarter of 2020 compared to $18.5 million, or 28.0%
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 was $1.5 million, or 2.7% of net sales
compared to income from operations of $4.5 million, or 6.8% of net
sales a year ago. Adjusted operating income for the first quarter
of 2020 was $2.5 million, or 4.5% of net sales.
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 condensed 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 first quarter 2020 results
will be broadcast live over the internet today, Tuesday, April 28,
2020 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®, 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
Company’s ability to face near-term challenges related to the
COVID-19 pandemic and the shelter-in-place orders currently in
effect in many states (paragraph 3), the Company’s ability to
capitalize on digital and distribution center capabilities and
increase liquidity (paragraph 3), and the Company’s positioning to
deliver sustained growth and increased profitability over the
long-term (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, 2019 (filed March 6, 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.
Rocky Brands, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(In thousands, except share
amounts)
March 31,
December 31,
March 31,
2020
2019
2019
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents
$
44,247
$
15,518
$
17,630
Trade receivables – net
33,277
45,585
41,161
Contract receivables
2,551
4,746
817
Other receivables
532
366
161
Inventories – net
77,214
76,731
69,905
Income tax receivable
-
150
348
Prepaid expenses
3,522
3,030
3,383
Total current assets
161,343
146,126
133,405
LEASED ASSETS
1,588
1,743
1,037
PROPERTY, PLANT & EQUIPMENT – net
28,434
27,423
23,438
IDENTIFIED INTANGIBLES – net
30,232
30,240
30,264
OTHER ASSETS
333
294
262
TOTAL ASSETS
$
221,930
$
205,826
$
188,406
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable
$
17,933
$
15,776
$
17,271
Contract liabilities
2,551
4,746
817
Accrued expenses:
Salaries and wages
1,204
3,044
1,518
Taxes - other
588
967
638
Accrued freight
282
867
455
Commissions
362
608
494
Accrued duty
4,041
3,824
2,124
Other
1,430
1,702
1,746
Total current liabilities
28,391
31,534
25,063
LONG TERM DEBT
20,000
-
-
LONG-TERM TAXES PAYABLE
169
169
169
LONG-TERM LEASE
1,031
1,158
517
DEFERRED INCOME TAXES
8,108
8,108
7,780
DEFERRED LIABILITIES
215
201
121
TOTAL LIABILITIES
57,914
41,170
33,650
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and
outstanding March 31, 2020 7,309,121; December 31, 2019 - 7,354,970
and March 31, 2019 - 7,391,660
67,195
67,993
68,849
Retained earnings
96,821
96,663
85,907
Total shareholders' equity
164,016
164,656
154,756
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
221,930
$
205,826
$
188,406
Rocky Brands, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(In thousands, except share
amounts)
Three Months Ended
March 31,
2020
2019
NET SALES
$
55,720
$
65,929
COST OF GOODS SOLD
36,400
42,951
GROSS MARGIN
19,320
22,978
OPERATING EXPENSES
17,807
18,479
INCOME FROM OPERATIONS
1,513
4,499
OTHER INCOME (EXPENSES)
(9
)
65
INCOME BEFORE INCOME TAXES
1,504
4,564
INCOME TAX EXPENSE
316
959
NET INCOME
$
1,188
$
3,605
INCOME PER SHARE
Basic
$
0.16
$
0.49
Diluted
$
0.16
$
0.48
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic
7,351
7,382
Diluted
7,386
7,434
Rocky Brands, Inc. and
Subsidiaries
Reconciliation of GAAP
Measures to Non-GAAP Measures
(In thousands, except share
amounts)
Three Months Ended
March 31,
2020
2019
GROSS
MARGIN
GROSS MARGIN, AS REPORTED
$
19,320
$
22,978
ADD: MANUFACTURING EXPENSES RELATED TO
COVID-19 CLOSURES*
988
-
ADJUSTED GROSS MARGIN
$
20,308
$
22,978
OPERATING
EXPENSES
$
17,807
$
18,479
INCOME FROM OPERATIONS, ADJUSTED
$
2,501
$
4,499
NET
INCOME
NET INCOME, AS REPORTED
$
1,188
$
3,605
ADD: MANUFACTURING EXPENSES RELATED TO
COVID-19 CLOSURES, AFTER TAX
781
-
ADJUSTED NET INCOME
$
1,969
$
3,605
NET INCOME PER SHARE, AS REPORTED
BASIC
$
0.16
$
0.49
DILUTED
$
0.16
$
0.48
ADJUSTED NET INCOME PER SHARE
BASIC
$
0.27
$
0.49
DILUTED
$
0.27
$
0.48
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC
7,351
7,382
DILUTED
7,386
7,434
* Adjustment related to the overhead and payroll expenses
incurred during the temporary closure of our manufacturing
facilities due to COVID-19.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200428005891/en/
Company Contact: Tom Robertson Chief Financial Officer (740)
753-9100 Investor Relations: Brendon Frey ICR, Inc. (203)
682-8200
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