Fourth Quarter Wholesale Sales Increased
4.7%
2017 Year-End Funded Debt Decreased 84.9% to
$2.2 Million
Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial
results for its fourth quarter and year ended December 31,
2017.
Fourth Quarter 2017 Sales and
Income
Fourth quarter net sales were $67.0 million versus net sales of
$67.0 million in the fourth quarter of 2016. The Company reported
fourth quarter net income of $4.4 million, or $0.59 per diluted
share, compared to a fourth quarter net loss of $0.6 million, or
($0.09) per diluted share in the year ago period.
The fourth quarter of 2017 included an after-tax charge of $1.6
million associated with the loss on the sale of the Creative
Recreation brand. Due to the recently enacted tax reform in the
fourth quarter of 2017, the Tax Cuts and Jobs Act (TCJA), we
recognized a one-time income tax benefit in the fourth quarter of
2017 of $3.2 million. The benefit is primarily a result of the new
lower domestic federal tax rate applied to our current and deferred
tax liability position, which was partially offset by a one-time
toll charge related to the repatriation of earnings from our
Dominican Republic operations. As a result of these one-time
charges due to the TCJA, we recorded a $2.9 million benefit in the
fourth quarter of 2017. Excluding the charges and impact of tax
reform, fourth quarter 2017 adjusted net income was $2.8 million,
or $0.37 per diluted share. The fourth quarter of 2016 included a
non-cash impairment charge related to the Creative Recreation brand
of $2.0 million, after-tax. Excluding this charge, fourth quarter
2016 net income was $1.3 million, or $0.18 per diluted share. (See
below for a reconciliation of GAAP financial measures to non-GAAP
financial measures).
Fiscal Year 2017 Sales and
Income
For fiscal year 2017, net sales were $253.2 million versus net
sales of $260.3 million in fiscal year 2016. The Company reported
net income of $9.6 million, or $1.29 per diluted share, for fiscal
year 2017, compared with a net loss of $2.1 million, or ($0.29) per
diluted share, for fiscal 2016.
Excluding $0.6 million after-tax of hurricane related expenses
the company recorded in the third quarter of 2017 and the
aforementioned expenses and charges related to the sale of the
Creative Recreation brand and the impact of tax reform, 2017
adjusted net income was $8.6 million, or $1.16 per diluted share.
Excluding the $0.8 million after-tax reorganizational charge the
company recorded in the third quarter 2016 and the aforementioned
non-cash impairment charge related to the Creative Recreation
brand, fiscal 2016 net income was $0.6 million, or $0.08 per
diluted share. (See below for a reconciliation of GAAP financial
measures to non-GAAP financial measures).
Jason Brooks, President and Chief Executive Officer, commented,
“We concluded a productive 2017 with a very solid fourth quarter
performance which was highlighted by mid-single digit growth for
both our wholesale and retail divisions. The product, marketing and
distribution strategies we’ve recently implemented aimed at
increasing full-price selling for our branded work, western and
outdoor footwear businesses are contributing to better top and
bottom line results. At the same time, we continue to successfully
grow our direct sales operations through the expansion of our
Lehigh Outfitters CustomFit program. This includes signing new
accounts and driving higher volumes with existing accounts fueled
by improved execution and an enhanced merchandise offering. With
respect to our military segment, 2017 marked a record year in terms
of revenue and margins despite the challenges that our employees
and production facility and the entire island of Puerto Rico faced
following the impact of Hurricane Maria.”
Brooks continued, “While we face some headwinds in 2018 from
expiring contracts and changes in market dynamics for our military
business and the sale of Creative Rec, we are cautiously optimistic
about the prospects for growth in our wholesale and direct
channels. The positive impact on gross margins from the
continuation of improved full-price selling and the change in sales
mix by segment compared with 2017, combined with the benefit from
recent tax reform, has the company well positioned to deliver
increased profitability on lower overall revenue and continue
generating value for shareholders.”
Fourth Quarter Review
Net sales for the fourth quarter were $67.0 million compared to
$67.0 million a year ago. Wholesale sales for the fourth quarter
increased 4.7% to $44.4 million compared to $42.4 million for the
same period in 2016. Retail sales for the fourth quarter increased
4.9% to $14.4 million compared to $13.7 million for the same period
last year. Military segment sales for the fourth quarter were $8.2
million compared to $10.9 million in the fourth quarter of
2016.
Gross margin in the fourth quarter of 2017 was $23.3 million, or
34.8% of sales, compared to $21.8 million, or 32.5% of sales, for
the same period last year. The 230 basis point increase was driven
by higher wholesale and military margins combined with a lower
percentage of military sales which carry lower gross margins than
wholesale and retail.
Selling, general and administrative (SG&A) expenses were
$19.6 million, including $0.3 million of transaction expenses
related to the sale of the Creative Recreation brand, compared to
$19.9 million a year ago. SG&A as a percent of sales decreased
50 basis points to 29.3% of net sales compared to 29.8% sales last
year.
Income from operations was $3.7 million compared to an operating
loss of $1.2 million in the year ago period. On an adjusted basis,
operating income was $4.0 million, or 6.0% of net sales, compared
to $1.8 million, or 2.8% of net sales a year ago. (See below for a
reconciliation of GAAP financial measures to non-GAAP financial
measures).
Interest expense was $109,000, compared to $157,000 for the
fourth quarter of 2016.
The Company’s funded debt decreased 84.9% or $12.4 million to
$2.2 million at December 31, 2017 versus $14.6 million at December
31, 2016.
Inventory decreased 5.1%, or $3.5 million, to $65.6 million at
December 31, 2017 compared with $69.2 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 operating expenses,” “non-GAAP adjusted other
income and 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 fourth quarter and
fiscal 2017 results will be broadcast live over the internet today,
Tuesday, February 20, 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. 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 reports on Form 10-Q
for the periods ended March 31, 2017 (filed May 5, 2017), June 30,
2017 (filed August 9, 2017) and September 30, 2017 (filed November
7, 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
December 31, 2017 2016 ASSETS: CURRENT ASSETS: Cash and cash
equivalents $ 3,680,776 $ 4,480,505 Trade receivables, net
45,027,002 40,844,583 Other receivables 806,468 688,251 Inventories
65,622,432 69,168,442 Income tax receivable 1,849,237 1,243,678
Prepaid expenses 2,199,648 2,354,107 Total current
assets 119,185,563 118,779,566 FIXED ASSETS – net 23,781,001
26,511,493 IDENTIFIED INTANGIBLES 30,314,749 33,415,694 OTHER
ASSETS 197,977 232,509 TOTAL ASSETS $
173,479,290 $ 178,939,262 LIABILITIES AND
SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $
12,982,535 $ 11,589,040 Accrued Expenses: Salaries and Wages
1,754,681 949,894 Taxes - Other 599,793 842,325 Accrued Freight
770,219 534,070 Commissions 455,845 446,703 Accrued Duty 2,160,847
1,980,598 Other 1,301,931 1,377,281 Total current
liabilities 20,025,851 17,719,911 LONG TERM DEBT 2,199,423
14,584,008 LONG TERM TAXES PAYABLE 2,286,512 - DEFERRED INCOME
TAXES 7,726,234 11,365,800 DEFERRED LIABILITIES 148,408
176,219 TOTAL LIABILITIES 32,386,428 43,845,938
SHAREHOLDERS' EQUITY: Common stock, no par value;
25,000,000 shares authorized; issued and
outstandingDecember 31, 2017 - 7,398,654 and December 31, 2016 -
7,421,455
68,973,927 69,291,637 Retained earnings 72,118,935
65,801,687 Total shareholders' equity 141,092,862
135,093,324 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $
173,479,290 $ 178,939,262
Rocky Brands, Inc. and
Subsidiaries Condensed Consolidated Statements of
Operations Three Months Ended Twelve Months Ended
December 31, December 31, 2017 2016 2017 2016 Unaudited Unaudited
Audited Audited NET SALES $ 66,993,982 $ 66,950,298 $
253,196,972 $ 260,258,584 COST OF GOODS SOLD 43,648,310
45,160,120 172,428,155
183,528,494 GROSS MARGIN 23,345,672 21,790,178 80,768,817
76,730,090 OPERATING EXPENSES Selling, general and
administrative expenses 19,630,063 19,946,312 68,943,561 75,631,490
Reorganizational charge - - - 1,159,527 Impairment charge -
3,000,000 - 3,000,000
Total Operating Expenses 19,630,063 22,946,312 68,943,561
79,791,017 INCOME (LOSS) FROM OPERATIONS 3,715,609
(1,156,134 ) 11,825,256 (3,060,927 ) OTHER INCOME AND
(EXPENSES): Interest expense (108,763 ) (157,336 ) (389,586 )
(616,567 ) Other – net (19,614 ) (23,857 ) 15,450 59,020 Loss on
disposition of Creative Recreation (2,089,816 ) -
(2,089,816 ) - Total other - net
(2,218,193 ) (181,193 ) (2,463,952 ) (557,547 ) INCOME
(LOSS) BEFORE INCOME TAXES 1,497,416 (1,337,327 ) 9,361,304
(3,618,474 ) INCOME TAX (BENEFIT) EXPENSE (2,899,362
) (703,078 ) (225,362 ) (1,479,078 )
NET INCOME (LOSS) $ 4,396,778 $ (634,249 ) $
9,586,666 $ (2,139,396 ) INCOME (LOSS)
PER SHARE Basic $ 0.59 $ (0.09 ) $ 1.29 $ (0.29 ) Diluted $ 0.59 $
(0.09 ) $ 1.29 $ (0.29 ) WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING Basic 7,398,844 7,427,520
7,428,176 7,505,219 Diluted
7,435,980 7,427,520 7,450,312
7,505,219
Rocky Brands, Inc. and Subsidiaries
Reconciliation of GAAP Financial Measures to Non-GAAP Financial
Measures Three Months Ended Twelve Months Ended December
31, December 31, 2017 2016 2017 2016
Gross
Margin
Gross margin, as reported $ 23,345,672 $ 21,790,178 $ 80,768,817 $
76,730,090 Add: Hurricane related expenses - -
963,570 - Adjusted gross margin
$ 23,345,672 $ 21,790,178 $ 81,732,387 $ 76,730,090
Operating
Expenses
Operating expenses, as reported $ 19,630,063 $ 22,946,312 $
68,943,561 $ 79,791,017 Less: Creative Recreation disposition
related expenses 299,663 - 299,663 - Less: Reorganizational charge
- - - 1,159,527 Less: Impairment charge -
3,000,000 - 3,000,000 Adjusted
operating expenses $ 19,330,400 $ 19,946,312
$ 68,643,898 $ 75,631,490
INCOME (LOSS) FROM OPERATIONS, ADJUSTED $ 4,015,272 $ 1,843,866 $
13,088,489 $ 1,098,600 OTHER INCOME AND (EXPENSES): Total
other - net, as reported (2,218,193 ) (181,193 ) (2,463,952 )
(557,547 ) Less: Loss on disposition of Creative Recreation
(2,089,816 ) - (2,089,816 ) -
Adjusted other - net (128,377 ) (181,193 ) (374,136 ) (557,547 )
Net Income
(Loss)
Net income (loss), as reported $ 4,396,778 $ (634,249 ) $ 9,586,666
$ (2,139,396 ) Add: Hurricane related expenses, after tax - -
635,956 - Add: Disposition of Creative Recreation, after tax
1,577,056 - 1,577,056 - Less: Impact of tax reform (1) (3,208,028 )
- (3,208,028 ) - Add: Reorganizational charge, after tax - - -
753,693 Add: Impairment charge, after tax -
1,950,000 - 1,950,000 Adjusted
net income $ 2,765,806 $ 1,315,751 $
8,591,650 $ 564,297 Net income
(loss) per share, as reported Basic $ 0.59 $ (0.09 ) $ 1.29 $ (0.29
) Diluted $ 0.59 $ (0.09 ) $ 1.29 $ (0.29 ) Adjusted net
income per share Basic $ 0.37 $ 0.18 $ 1.16 $ 0.08 Diluted $ 0.37 $
0.18 $ 1.16 $ 0.08 Weighted average shares outstanding Basic
7,398,844 7,427,520 7,428,176
7,505,219 Diluted 7,435,980
7,437,888 7,450,312 7,519,414
(1): Due to the recently enacted tax reform, Tax Cuts and Jobs
Act (TCJA), we recognized a one-time income tax benefit in the
fourth quarter of 2017 of $3.2 million. The benefit is primarily a
result of the new lower domestic federal tax rate applied to our
current and deferred tax liability position, which was partially
offset by a one-time toll charge related to the repatriation of
earnings from our Dominican Republic operations. As a result of
these one-time charges we recorded a $2.9 million benefit in the
fourth quarter of 2017. The adjusted tax expense without the impact
of TCJA was $308,666 and $2,982,666 for the three and twelve months
ended December 31, 2017 resulting in an effective tax rate of 20.6%
and 31.9% for the respective periods. Our effective tax rate,
adjusted for the TCJA, for the fourth quarter, was below historic
levels due to the recently passed Bipartisan Budget Act of 2018,
which permits a deduction for income attributable to domestic
production activities in Puerto Rico through the end of 2017.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180220006291/en/
Rocky Brands, Inc.Tom Robertson, 740-753-1951Chief Financial
OfficerorInvestor Relations:ICR, Inc.Brendon Frey, 203-682-8200
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