Rocky Brands, Inc. Announces Fourth Quarter and Fiscal 2016 Results

Fourth Quarter Revenue Increased 2.6% to $67.0 Million

Funded Debt Decreased 38.5% Year-Over-Year to $14.6 Million

NELSONVILLE, Ohio--()--Rocky Brands, Inc. (NASDAQ:RCKY) today announced financial results for its fourth quarter and year ended December 31, 2016.

Fourth Quarter 2016 Sales and Income

Fourth quarter net sales increased 2.6% to $67.0 million versus net sales of $65.3 million in the fourth quarter of 2015. The Company reported a fourth quarter net loss of $0.6 million, or ($0.09) per diluted share, compared to fourth quarter net income of $1.4 million, or $0.18 per diluted share in the year ago period. The fourth quarter of 2016 included a non-cash impairment charge related to the Creative Recreation brand of $3.0 million. Excluding this charge, fourth quarter 2016 net income was $1.3 million, or $0.18 per diluted share. (See below for a reconciliation of fourth quarter 2016 income per diluted share on a GAAP basis to a non-GAAP basis).

Fiscal Year 2016 Sales and Income

For fiscal year 2016, net sales decreased 3.4% to $260.3 million versus net sales of $269.3 million in fiscal year 2015. The Company reported a net loss of $2.1 million, or ($0.29) per diluted share, for fiscal year 2016, compared with net income of $6.6 million, or $0.87 per diluted share, for fiscal 2015. Excluding the $1.2 million 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 fiscal year 2016 income per diluted share on a GAAP basis to a non-GAAP basis).

Mike Brooks, Chief Executive Officer, commented, “The fundamentals of our business continued to improve in the fourth quarter following a difficult start to 2016. While our full year results were disappointing, we’ve taken a number of actions that we believe will improve our earnings power going forward. These include reorganizing our sales teams and reducing headcount in order to lower our expense structure. We also improved the efficiency of our expanded domestic manufacturing facility which allows us to more profitably capitalize on the growing demand for military footwear. In addition, we recently signed a licensing agreement for the Creative Recreation brand in Europe that will help enhance our overall margins. As 2017 gets underway, I’m confident that the changes we’ve made to our operating strategies and leadership team in response to the challenges of the past 12-months have made us a stronger organization and better positions Rocky Brands to return greater value to its shareholders over the long-term.”

Fourth Quarter Review

Net sales for the fourth quarter increased 2.6% to $67.0 million compared to $65.3 million a year ago. Wholesale sales for the fourth quarter decreased 8.9% to $42.4 million compared to $46.5 million for the same period in 2015. Retail sales for the fourth quarter were $13.7 million compared to $13.5 million for the same period last year. Military segment sales for the fourth quarter increased 106.4% to $10.9 million compared to $5.3 million in the fourth quarter of 2015.

Gross margin in the fourth quarter of 2016 was $21.8 million, or 32.5% of sales, compared to $22.2 million, or 33.9% of sales, for the same period last year. The 140 basis point decrease was driven by the higher percentage of military sales which carry lower gross margins than wholesale and retail.

Selling, general and administrative (SG&A) expenses were $19.9 million compared to $20.2 million a year ago. The $0.3 million decrease in SG&A expenses was due primarily to lower compensation and lower advertising expenses, offset primarily by a $1.8 million increase in bad debt expense compared to a year ago. As a percent of sales, SG&A decreased 120 basis points to 29.8% of net sales compared to 31.0% sales last year.

Income from operations, excluding the aforementioned non-cash impairment charge, was $1.8 million, or 2.8% of net sales, compared to $1.9 million, or 3.0% of net sales a year ago.

Interest expense was $157,000, compared to $167,000 for the fourth quarter of 2015.

The Company’s funded debt decreased 38.5% or $9.1 million to $14.6 million at December 31, 2016 versus $23.7 million at December 31, 2015.

Inventory decreased 10.2%, or $7.8 million, to $69.2 million at December 31, 2016 compared with $77.0 million on the same date a year ago.

Conference Call Information

The Company’s conference call to review fourth quarter and fiscal 2016 results will be broadcast live over the internet today, Thursday, February 16, 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. 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, 2015 (filed March 3, 2016) and quarterly reports on Form 10-Q for the periods ended March 31, 2016 (filed April 29, 2016), June 30, 2016 (filed July 28, 2016), and September 30, 2016 (filed October 28, 2016). 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, 2016   December 31, 2015
Unaudited Audited
ASSETS:
 
CURRENT ASSETS:
Cash and cash equivalents $ 4,480,505 $ 3,407,140
Trade receivables – net 40,844,583 44,549,207
Other receivables 688,251 583,479
Inventories 69,168,442 76,991,059
Income tax receivable 1,243,678 128,699
Deferred income taxes 1,633,353 1,031,818
Prepaid expenses   2,354,107   2,530,517
Total current assets 120,412,919 129,221,919
FIXED ASSETS – net 26,511,493 27,836,527
IDENTIFIED INTANGIBLES 33,415,694 36,547,873
OTHER ASSETS   232,509   258,812
TOTAL ASSETS $ 180,572,615 $ 193,865,131
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 11,589,040 $ 9,118,555
Accrued expenses:
Taxes - other 842,325 533,220
Other   5,288,546   5,096,441
Total current liabilities 17,719,911 14,748,216
 
LONG TERM DEBT 14,584,008 23,700,089
DEFERRED INCOME TAXES 12,999,153 13,000,609
DEFERRED LIABILITIES   176,219   295,676
 
TOTAL LIABILITIES 45,479,291 51,744,590
 
SHAREHOLDERS' EQUITY:
Common stock, no par value;

25,000,000 shares authorized; issued and outstanding December
31, 2016 - 7,421,455; December 31, 2015 - 7,567,271

69,291,637

70,882,392

 
Retained earnings   65,801,687   71,238,149
 
Total shareholders' equity   135,093,324   142,120,541
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 180,572,615 $ 193,865,131
 
 

Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations

 
 

Three Months Ended
December 31,

 

Year Ended
December 31,

2016   2015 2016   2015
Unaudited Audited Unaudited Audited
NET SALES $ 66,950,298 $ 65,266,028 $ 260,258,584 $ 269,302,023
 
COST OF GOODS SOLD   45,160,120     43,111,609     183,528,494     180,410,184  
 
GROSS MARGIN 21,790,178 22,154,419 76,730,090 88,891,839
 
OPERATING EXPENSES
Selling, general and administrative expenses 19,946,312 20,221,612 75,631,490 78,402,079
Reorganizational charge - - 1,159,527 -
Impairment charge   3,000,000     -     3,000,000     -  
Total operating expenses 22,946,312 20,221,612 79,791,017 78,402,079
 
INCOME (LOSS) FROM OPERATIONS (1,156,134 ) 1,932,807 (3,060,927 ) 10,489,760
 
OTHER INCOME AND (EXPENSES):
Interest expense (157,336 ) (167,152 ) (616,567 ) (696,827 )
Other – net   (23,857 )   (8,732 )   59,020     (105,433 )
Total other - net (181,193 ) (175,884 ) (557,547 ) (802,260 )
 
INCOME (LOSS) BEFORE INCOME TAXES (1,337,327 ) 1,756,923 (3,618,474 ) 9,687,500
 
INCOME TAX EXPENSE (BENEFIT)   (703,078 )   374,053     (1,479,078 )   3,084,343  
 
NET INCOME (LOSS) $ (634,249 ) $ 1,382,870   $ (2,139,396 ) $ 6,603,157  
 
INCOME PER SHARE
Basic $ (0.09 ) $ 0.18 $ (0.29 ) $ 0.87
Diluted $ (0.09 ) $ 0.18 $ (0.29 ) $ 0.87
 
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic   7,427,520     7,567,239     7,505,219     7,563,205  
Diluted   7,427,520     7,578,190     7,505,219     7,574,172  
 
 
Reconciliation of Income per Diluted Share on a GAAP Basis to a Non-GAAP Basis
       
 
Three Months Ended December 31, 2016
(Unaudited)
GAAP Basis

Reorganizational
Charge

Impairment
Charge

Non GAAP
Basis

NET SALES $ 66,950,298 $ - $ - $ 66,950,298
 
COST OF GOODS SOLD   45,160,120     -   -     45,160,120  
 
GROSS MARGIN 21,790,178 - - 21,790,178
 
OPERATING EXPENSES
Selling, general and administrative expenses 19,946,312 - - 19,946,312
Reorganizational charge - -

-

-

Impairment charge   3,000,000     -   3,000,000     -  
Total operating expenses 22,946,312 - 3,000,000 19,946,312
 
INCOME (LOSS) FROM OPERATIONS (1,156,134 ) - (3,000,000 ) 1,843,866
 
OTHER INCOME AND (EXPENSES):
Interest expense (157,336 ) - - (157,336 )
Other – net   (23,857 )   -   -     (23,857 )
Total other - net (181,193 ) - - (181,193 )
 
INCOME (LOSS) BEFORE INCOME TAXES (1,337,327 ) - (3,000,000 ) 1,662,673
 
INCOME TAX (BENEFIT) EXPENSE   (703,078 )   -   (1,050,000 )   346,922  
 
NET INCOME (LOSS) $ (634,249 ) $ - $ (1,950,000 ) $ 1,315,751  
 
INCOME PER DILUTED SHARE $ (0.09 ) $ - $ (0.26 ) $ 0.18
 
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic   7,427,520     7,427,520   7,427,520     7,427,520  
Diluted   7,427,520     7,427,520   7,437,888     7,437,888  
 
 
Reconciliation of Income per Diluted Share on a GAAP Basis to a Non-GAAP Basis
       
 
Twelve Months Ended December 31, 2016
(Unaudited)
GAAP Basis

Reorganizational
Charge

Impairment
Charge

Non GAAP
Basis

NET SALES $ 260,258,584 $ - $ - $ 260,258,584
 
COST OF GOODS SOLD   183,528,494     -     -     183,528,494  
 
GROSS MARGIN 76,730,090 - - 76,730,090
 
OPERATING EXPENSES
Selling, general and administrative expenses 75,631,490 - - 75,631,490
Reorganizational charge 1,159,527 1,159,527 - -
Impairment charge   3,000,000     -     3,000,000     -  
Total operating expenses 79,791,017 1,159,527 3,000,000 75,631,490
 
INCOME (LOSS) FROM OPERATIONS (3,060,927 ) (1,159,527 ) (3,000,000 ) 1,098,600
 
OTHER INCOME AND (EXPENSES):
Interest expense (616,567 ) - - (616,567 )
Other – net   59,020     -     -     59,020  
Total other - net (557,547 ) - - (557,547 )
 
INCOME (LOSS) BEFORE INCOME TAXES (3,618,474 ) (1,159,527 ) (3,000,000 ) 541,053
 
INCOME TAX (BENEFIT) EXPENSE   (1,479,078 )   (405,834 )   (1,050,000 )   (23,244 )
 
NET INCOME (LOSS) $ (2,139,396 ) $ (753,693 ) $ (1,950,000 ) $ 564,297  
 
INCOME PER DILUTED SHARE $ (0.29 ) $ (0.10 ) $ (0.26 ) $ 0.08
 
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic   7,505,219     7,505,219     7,505,219     7,505,219  
Diluted   7,505,219     7,519,414     7,519,414     7,519,414  
 

Contacts

ROCKY BRANDS, INC.
Mike Brooks, 740-753-1951
Chief Executive Officer
or
Investor Relations:
ICR, Inc.
Brendon Frey, 203-682-8200

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