Rocky Brands, Inc. Announces Fourth Quarter and Fiscal 2013 Results Business Wire NELSONVILLE, Ohio -- February 25, 2014 Rocky Brands, Inc. (NASDAQ:RCKY) today announced financial results for its fourth quarter and fiscal year ended December 31, 2013. Fourth Quarter 2013 Sales and Income Fourth quarter net sales increased 5.7% to $61.6 million, which included zero revenue from the Creative Recreation acquisition that closed on December 13, 2013, versus net sales of $58.3 million in the fourth quarter of 2012. The Company reported fourth quarter net income of $1.8 million, or $0.24 per diluted share compared with net income of $2.5 million, or $0.34 per diluted share in the fourth quarter of 2012. The fourth quarter of 2013 included a one-time expense of $1.0 million and a one-time gain of $0.6 million related to the acquisition of Creative Recreation. Also included in the fourth quarter of 2013 were expenses of $172,000 associated with the ongoing operations of Creative Recreation. Excluding all expenses and income related to Creative Recreation, fourth quarter 2013 net income was $2.2 million, or $0.29 per diluted share. (See below for a reconciliation of fourth quarter 2013 income per diluted share on a GAAP basis to a non-GAAP basis). Fiscal Year 2013 Sales and Income For fiscal year 2013, net sales increased 7.1% to $244.9 million versus net sales of $228.5 million in fiscal year 2012. The Company reported net income of $7.4 million, or $0.98 per diluted share, for fiscal year 2013, compared with net income of $8.9 million, or $1.18 per diluted share, for fiscal 2012. Excluding the aforementioned expenses and income related to Creative Recreation, fiscal year 2013 net income was $7.9 million, or $1.04 per diluted share. (See below for a reconciliation of fiscal year 2013 income per diluted share on a GAAP basis to a non-GAAP basis). David Sharp, President and Chief Executive Officer, commented, “We finished 2013 with a strong performance from our work category which benefited from cold, snowy conditions across much of the U.S. during the fourth quarter. Despite a difficult holiday season for less weather sensitive footwear categories, we experienced solid demand for the Durango brand as consumers continue to respond positively to our broader product offering. While the overall retail environment remains challenging, we are optimistic about our prospects in 2014. The addition of Creative Recreation is an exciting new growth vehicle that we are confident will over time benefit from our operational and supply chain capabilities. At the same time, we believe there are opportunities to expand our market share in work, western and outdoor through compelling new product introductions and further evolving our direct to consumer channel.” Fourth Quarter Review Net sales for the fourth quarter increased 5.7% to $61.6 million compared to $58.3 million a year ago. Wholesale sales for the fourth quarter were $47.7 million compared to $46.2 million for the same period in 2012. The $1.5 million increase was driven by a $3.8 million or 9.0% increase in footwear sales partially offset by a $2.3 million decrease in apparel sales. The decrease in apparel sales was the result of the Company’s decision to transition some apparel to a licensing model in early 2013. Retail sales for the fourth quarter increased to $12.9 million compared to $12.0 million for the same period last year. Military segment sales for the fourth quarter increased to $1.0 million compared to no military sales in the fourth quarter of 2012. Gross margin in the fourth quarter of 2013 was $21.8 million, or 35.4% of sales, compared to $20.9 million, or 36.0% of sales, for the same period last year. The 60 basis point decrease was driven by increased military sales versus the year ago period, which carry lower gross margins. Selling, general and administrative (SG&A) expenses, excluding the aforementioned expense associated with the ongoing operations of Creative Recreation, were $18.4 million, or 29.9% of net sales, for the fourth quarter of 2013 compared to $16.8 million, or 28.8% of net sales, a year ago. The 110 basis point increase in SG&A as a percent of net sales was driven primarily by the reversal of incentive compensation accruals in the fourth quarter of 2012. Income from operations, excluding the aforementioned expenses associated with the acquisition and ongoing operations of Creative Recreation was $3.4 million, or 5.6% of net sales, compared to $4.1 million, or 7.1% of net sales, a year ago. Interest expense was $0.2 million for the fourth quarter of 2013, versus $0.2 million for the same period last year. The Company’s funded debt was $38.4 million at December 31, 2013 versus $23.5 million at December 31, 2012, with the majority of the increase related to additional borrowings to fund the acquisition of Creative Recreation. Inventory increased 16.3% or $11.0 million to $78.2 million at December 31, 2013 compared with $67.2 million on the same date a year ago. Inventory at December 31, 2013 included approximately $1.0 million associated with the acquisition of Creative Recreation. Conference Call Information The Company’s conference call to review fourth quarter and fiscal 2013 results will be broadcast live over the internet today, Tuesday, February 25, 2014 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, and include statements in this press release regarding market share (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, 2012 (filed March 4, 2013 and amended on March 5, 2013) and quarterly reports on Form 10-Q for the quarters ended March 31, 2013 (filed April 25, 2013), June 30, 2013 (filed July 29, 2013) and September 30, 2013 (filed November 6, 2013). 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, 2013 December 31, 2012 Unaudited Audited ASSETS: CURRENT ASSETS: Cash and cash equivalents $ 4,215,617 $ 4,022,579 Trade receivables – net 49,069,668 44,555,057 Other receivables 325,888 575,984 Inventories 78,171,670 67,196,245 Income tax receivable 242,228 - Deferred income taxes 1,104,050 1,252,030 Prepaid expenses 2,529,407 2,127,726 Total current assets 135,658,528 119,729,621 FIXED ASSETS – net 26,205,080 24,252,465 IDENTIFIED INTANGIBLES 36,807,099 30,498,802 OTHER ASSETS 354,051 363,527 TOTAL ASSETS $ 199,024,758 $ 174,844,415 LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $ 11,486,473 $ 9,930,518 Accrued expenses: Taxes - other 901,116 704,064 Income tax payable - 335,210 Other 5,028,850 3,324,668 Total current liabilities 17,416,439 14,294,460 LONG TERM DEBT 38,388,198 23,461,340 DEFERRED INCOME TAXES 11,750,718 11,148,333 DEFERRED LIABILITIES 255,906 303,406 TOTAL LIABILITIES 67,811,261 49,207,539 SHAREHOLDERS' EQUITY: Common stock, no par value; 25,000,000 shares authorized; issued and outstanding December 31, 2013 - 7,536,448; 70,153,570 69,694,770 December 31, 2012 - 7,503,568 Retained earnings 61,059,927 55,942,106 Total shareholders' equity 131,213,497 125,636,876 TOTAL LIABILITIES AND $ 199,024,758 $ 174,844,415 SHAREHOLDERS' EQUITY Rocky Brands, Inc. and Subsidiaries Condensed Consolidated Statements of Operations Three Months Ended Year Ended December 31, December 31, 2013 2012 2013 2012 Unaudited Unaudited Unaudited Audited NET SALES $ 61,559,288 $ 58,263,374 $ 244,870,731 $ 228,537,050 COST OF GOODS 39,737,764 37,313,685 161,328,280 148,031,073 SOLD GROSS MARGIN 21,821,524 20,949,689 83,542,451 80,505,977 OPERATING EXPENSES Selling, general and 18,548,044 16,799,780 71,351,688 66,679,761 administrative expenses Acquisition related 1,028,526 - 1,172,047 - expenses Total operating 19,576,570 16,799,780 72,523,735 66,679,761 expenses INCOME FROM 2,244,954 4,149,909 11,018,716 13,826,216 OPERATIONS OTHER INCOME AND (EXPENSES): Interest (211,621 ) (183,671 ) (688,502 ) (650,873 ) expense Gain on bargain 601,975 601,975 purchase Other – net (189,938 ) (230,962 ) (116,665 ) (87,924 ) Total other - 200,416 (414,633 ) (203,192 ) (738,797 ) net INCOME BEFORE 2,445,370 3,735,276 10,815,524 13,087,419 INCOME TAXES INCOME TAX 671,186 1,187,199 3,442,768 4,232,654 EXPENSE NET INCOME $ 1,774,184 $ 2,548,077 $ 7,372,756 $ 8,854,765 INCOME PER SHARE Basic $ 0.24 $ 0.34 $ 0.98 $ 1.18 Diluted $ 0.24 $ 0.34 $ 0.98 $ 1.18 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 7,520,361 7,503,568 7,517,364 7,503,494 Diluted 7,520,361 7,503,568 7,517,364 7,503,494 Reconciliation of Income per Diluted Share on a GAAP Basis to a Non-GAAP Basis Three Months Ended December 31, 2013 (Unaudited) Acquisition Creative Related Recreation Expenses and December GAAP Basis Income Operations Non GAAP Basis NET SALES $ 61,559,288 $ - $ - $ 61,559,288 COST OF GOODS 39,737,764 - - 39,737,764 SOLD GROSS MARGIN 21,821,524 - - 21,821,524 OPERATING EXPENSES Selling, general and 18,548,044 - 172,418 18,375,626 administrative expenses Acquisition related 1,028,526 1,028,526 - - expenses Total operating 19,576,570 1,028,526 172,418 18,375,626 expenses INCOME FROM 2,244,954 (1,028,526 ) (172,418 ) 3,445,898 OPERATIONS OTHER INCOME AND (EXPENSES): Interest (211,621 ) - - (211,621 ) expense Gain on bargain 601,975 601,975 - - purchase Other – net (189,938 ) - - (189,938 ) Total other - 200,416 601,975 - (401,559 ) net INCOME BEFORE 2,445,370 (426,551 ) (172,418 ) 3,044,339 INCOME TAXES INCOME TAX 671,186 (149,293 ) (60,346 ) 880,825 EXPENSE NET INCOME $ 1,774,184 $ (277,258 ) $ (112,072 ) $ 2,163,514 INCOME PER $ 0.24 $ (0.04 ) $ (0.01 ) $ 0.29 DILUTED SHARE Reconciliation of Income per Diluted Share on a GAAP Basis to a Non-GAAP Basis Year Ended December 31, 2013 (Unaudited) Acquisition Creative Related Recreation Expenses and December Non GAAP GAAP Basis Income Operations Basis NET SALES $ 244,870,731 $ - $ - $ 244,870,731 COST OF GOODS 161,328,280 - - 161,328,280 SOLD GROSS MARGIN 83,542,451 - - 83,542,451 OPERATING EXPENSES Selling, general and 71,351,688 - 172,418 71,179,270 administrative expenses Acquisition related 1,172,047 1,172,047 - - expenses Total operating 72,523,735 1,172,047 172,418 71,179,270 expenses INCOME FROM 11,018,716 (1,172,047 ) (172,418 ) 12,363,181 OPERATIONS OTHER INCOME AND (EXPENSES): Interest (688,502 ) - - (688,502 ) expense Gain on bargain 601,975 601,975 - - purchase Other – net (116,665 ) - - (116,665 ) Total other - (203,192 ) 601,975 - (805,167 ) net INCOME BEFORE 10,815,524 (570,072 ) (172,418 ) 11,558,014 INCOME TAXES INCOME TAX 3,442,768 (199,525 ) (60,346 ) 3,702,639 EXPENSE NET INCOME $ 7,372,756 $ (370,547 ) $ (112,072 ) $ 7,855,375 INCOME PER $ 0.98 $ (0.05 ) $ (0.01 ) $ 1.04 DILUTED SHARE Contact: Rocky Brands, Inc. Jim McDonald, 740-753-1951 Chief Financial Officer or Investor Relations: ICR, Inc. Brendon Frey, 203-682-8200
Rocky Brands, Inc. Announces Fourth Quarter and Fiscal 2013 Results
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