Diluted EPS Increased 123% to $0.67
Wholesales Sales Increased 2.1% to $47.0
Million
Retail Sales Increased 7.6% to $11.9
Million
Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial
results for its third quarter ended September 30, 2018.
Third Quarter and Year-to-Date 2018
Sales and Net Income
Third quarter net sales increased 1.9% to $65.9 million compared
to $64.7 million in the third quarter of 2017. The Company reported
third quarter net income of $5.0 million, or $0.67 per diluted
share compared to a net income of $2.2 million, or $0.30 per
diluted share in the third quarter of 2017. Adjusted net income for
the third quarter of 2018 was $4.5 million, or $0.60 per diluted
share compared to adjusted net income of $2.9 million, or $0.39 per
diluted share in the prior year period.
Net sales were $185.5 million and $186.2 million for the nine
months ended September 30, 2018 and 2017, respectively. The Company
reported net income of $10.9 million, or $1.47 per diluted share
and a net income of $5.2 million, or $0.70 per diluted share for
the nine months ended September 30, 2018 and 2017, respectively.
Adjusted net income for the first nine months of 2018 was $10.4
million, or $1.40 per diluted share compared to an adjusted net
income of $5.8 million, or $0.78 per diluted share in the prior
year period.
Jason Brooks, President and Chief Executive Officer, commented,
“We delivered another quarter of solid year-over-year improvements
highlighted by strong gains in gross margin and operating profit.
The strategic initiatives that we’ve been executing over the past
12-months continued to drive sales growth in our two highest margin
channels – wholesale and retail. Our commitment to developing
compelling product that serves the needs of our consumers in the
work, western, outdoor and commercial military segments of the
market coupled with enhanced marketing programs and improved
service levels is fueling our success. With our portfolio of
authentic brands, internal manufacturing capabilities, and
differentiated direct business-to-business model, we are confident
that the Company is well positioned to achieve profitable growth on
an annual basis and generate increased shareholder value over the
long-term.”
Third Quarter and Year-to-Date
Review
Wholesale sales for the third quarter increased 2.1% to $47.0
million compared to $46.0 million for the same period in 2017.
Retail sales for the third quarter increased 7.6% to $11.9 million
compared to $11.1 million for the same period last year. Military
segment sales for the third quarter were $7.0 million compared to
$7.6 million in the third quarter of 2017.
Gross margin in the third quarter of 2018 increased 14.8% to
$22.4 million, or 34.0% of sales, compared to $19.5 million, or
30.2% of sales, for the same period last year. The 380 basis point
increase was driven by higher wholesale, retail and military
margins combined with a lower percentage of military sales, which
carry lower gross margins than wholesale and retail sales.
Operating expenses were $16.8 million, or 25.5% of net sales,
for the third quarter of 2018 compared to $16.0 million, or 24.8%
of net sales, a year ago. The increase in operating expenses was
primarily related to the increased investments in our core brands
to help initiate growth, variable expenses tied to sales increases,
and bad debt expense. The increase was partially offset by the
reduction of expenses for the Creative Recreation brand, which was
sold in the fourth quarter of 2017.
Income from operations for the third quarter of 2018 increased
61.0% to $5.6 million, or 8.5% of net sales compared to $3.5
million for the same period a year ago, or 5.4% of net sales.
For the first nine-months of 2018, wholesale sales increased
4.0% to $127.2 million compared to $122.3 million for the same
period in 2017. Retail sales for the first nine-months increased
8.2% to $36.7 million compared to $33.9 million for the same period
last year. Military segment sales for the first nine-months were
$21.6 million compared to $29.9 million in the first nine-months of
2017.
Gross margin in the first nine-months of 2018 increased 9.5% to
$62.9 million, or 33.9% of sales, compared to $57.4 million, or
30.8% of sales, for the same period last year.
Operating expenses were $49.7 million, or 26.8% of net sales,
for the first nine-months of 2018 compared to $49.3 million, or
26.5% of net sales, a year ago. The increase in operating expenses
was primarily related to the increased investments in our core
brands to help initiate growth, variable expenses tied to sales
increases, and bad debt expense. The increase was partially offset
by the reduction of expenses for the Creative Recreation brand,
which was sold in the fourth quarter of 2017.
Income from operations for the first nine-months of 2018
increased 62.9% to $13.2 million, or 7.1% of net sales compared to
$8.1 million for the same period a year ago, or 4.4% of net
sales.
Balance Sheet Review
Cash and cash equivalents increased $2.0 million or 88.0% to
$4.2 million at September 30, 2018 compared with the same date a
year ago.
Inventory at September 30, 2018 increased 2.0% to $78.4 million
compared to $76.9 million on the same date a year ago.
The Company had no long-term debt at September 30, 2018 compared
to $11.6 million at September 30, 2017.
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 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 2018
results will be broadcast live over the internet today, Tuesday,
October 23, 2018 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 our future
profitability and the delivery of greater shareholder value
(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, 2017 (filed March 12, 2018) and quarterly
reports on Form 10-Q for the quarters ended March 31, 2018 (filed
May 9, 2018) and June 30, 2018 (filed August 3, 2018). 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 (Unaudited)
September 30, December 31, September 30, 2018 2017 2017
ASSETS: CURRENT ASSETS: Cash and cash equivalents $ 4,210,391 $
3,680,776 $ 2,238,862 Trade receivables, net 50,691,234 45,027,002
45,106,205 Contract receivables 4,849,176 - - Other receivables
281,798 806,468 800,322 Inventories 78,408,480 65,622,432
76,885,153 Income tax receivable - 1,849,237 - Prepaid expenses
2,121,908 2,199,648 2,431,996 Total current assets 140,562,987
119,185,563 127,462,538 PROPERTY, PLANT & EQUIPMENT – net
23,208,663 23,781,001 24,742,833 IDENTIFIED INTANGIBLES – net
30,282,805 30,314,749 33,319,334 OTHER ASSETS 163,821 197,977
225,310 TOTAL ASSETS $ 194,218,276 $ 173,479,290 $ 185,750,015
LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES:
Accounts payable $ 20,621,758 $ 12,982,535 $ 16,861,274 Contract
liabilities 4,849,176 - - Accrued expenses: Salaries and wages
3,660,745 1,754,681 2,298,042 Taxes - other 158,251 599,793 502,252
Accrued freight 465,293 770,219 483,859 Commissions 431,532 455,845
401,261 Accrued duty 2,726,833 2,160,847 2,534,286 Income tax
payable 1,888,060 - 1,275,893 Other 1,308,627 1,301,931 1,601,591
Total current liabilities 36,110,275 20,025,851 25,958,458 LONG
TERM DEBT - 2,199,423 11,630,000 LONG TERM TAXES PAYABLE 169,366
2,286,512 - DEFERRED INCOME TAXES 7,726,234 7,726,234 10,464,435
DEFERRED LIABILITIES 152,271 148,408 181,737 TOTAL LIABILITIES
44,158,146 32,386,428 48,234,630 SHAREHOLDERS' EQUITY: Common
stock, no par value;
25,000,000 shares authorized; issued and
outstandingSeptember 30, 2018 - 7,421,317; December 31, 2017 -
7,398,654and September 30, 2017 - 7,403,195
69,589,049 68,973,927 68,979,376 Retained earnings 80,471,081
72,118,935 68,536,009 Total shareholders' equity 150,060,130
141,092,862 137,515,385 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 194,218,276 $ 173,479,290 $ 185,750,015
Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited) Three Months Ended Nine Months Ended
September 30, September 30, 2018 2017 2018 2017 NET SALES $
65,915,564 $ 64,675,082 $ 185,508,077 $ 186,202,989 COST OF GOODS
SOLD 43,515,323 45,163,538 122,610,241 128,779,845 GROSS MARGIN
22,400,241 19,511,544 62,897,836 57,423,144 OPERATING
EXPENSES 16,790,903 16,026,654 49,687,739 49,313,498 INCOME
FROM OPERATIONS 5,609,338 3,484,890 13,210,097 8,109,646
OTHER INCOME (EXPENSES) 30,502 (98,126) (147,995) (245,760)
INCOME BEFORE INCOME TAXES 5,639,840 3,386,764 13,062,102 7,863,886
INCOME TAX EXPENSE 594,830 1,152,000 2,116,830 2,674,000
NET INCOME $ 5,045,010 $ 2,234,764 $ 10,945,272 $ 5,189,886
INCOME PER SHARE Basic $ 0.68 $ 0.30 $ 1.48 $ 0.70 Diluted $
0.67 $ 0.30 $ 1.47 $ 0.70
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
Basic 7,418,028 7,437,913 7,411,670 7,438,061 Diluted 7,480,340
7,443,001 7,453,764 7,441,378
Rocky Brands, Inc. and
Subsidiaries Reconciliation of GAAP Measures to Non-GAAP
Measures (Unaudited) Three Months Ended Nine
Months Ended September 30, September 30, 2018 2017 2018 2017
Gross
Margin
Gross margin, as reported $ 22,400,241 $ 19,511,544 $ 62,897,836 $
57,423,144 Add: Hurricane related expenses - 963,570 - 963,570
Adjusted gross margin $ 22,400,241 $ 20,475,114 $ 62,897,836 $
58,386,714
Operating
Expenses
$ 16,790,903 $ 16,026,654 $ 49,687,739 $ 49,313,498
Net
Income
Net income, as reported $ 5,045,010 $ 2,234,764 $ 10,945,272 $
5,189,886 Add: Hurricane related expenses, after tax - 635,956 -
635,956 Less: Transition Tax Adjustment* (561,000) - (561,000) -
Adjusted net income $ 4,484,010 $ 2,870,720 $ 10,384,272 $
5,825,842 Net income per share, as reported Basic $ 0.68 $
0.30 $ 1.48 $ 0.70 Diluted $ 0.67 $ 0.30 $ 1.47 $ 0.70
Adjusted net income per share Basic $ 0.60 $ 0.39 $ 1.40 $ 0.78
Diluted $ 0.60 $ 0.39 $ 1.40 $ 0.78 Weighted average shares
outstanding Basic 7,418,028 7,437,913 7,411,670 7,438,061 Diluted
7,480,340 7,443,001 7,453,764 7,441,378
* 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/20181023006026/en/
Rocky Brands, Inc.Tom Robertson, 740-753-9100Chief Financial
OfficerorInvestor Relations:ICR, Inc.Brendon Frey, 203-682-8200
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