Rocky Brands, Inc. Announces Record Fourth Quarter 2014 Results

Sales Increased 28.2% to a Fourth Quarter Record $78.9 Million

Diluted Earnings Per Share Increased 145.8% to a Fourth Quarter Record $0.59

 

NELSONVILLE, Ohio--Rocky Brands, Inc. (NASDAQ:RCKY) today announced financial results for its fourth quarter and year ended December 31, 2014.  

Fourth Quarter 2014 Sales and Income
 
Fourth quarter net sales increased 28.2% to a record $78.9 million versus net sales of $61.6 million in the fourth quarter of 2013. The Company reported record fourth quarter net income of $4.5 million, or $0.59 per diluted share as compared to net income of $1.8 million, or $0.24 per diluted share in the fourth quarter of 2013. 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 2014 Sales and Income
 
For fiscal year 2014, net sales increased 16.9% to $286.2 million versus net sales of $244.9 million in fiscal year 2013. The Company reported net income of $9.8 million, or $1.30 per diluted share, for fiscal year 2014, compared with net income of $7.4 million, or $0.98 per diluted share, for fiscal 2013. 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, “Our record fourth quarter performance represents a great finish to a strong year for our company. Sales growth accelerated to its highest level of 2014 in the fourth quarter fueled by consumer demand for our compelling collections of Work, Western, Hunting and Commercial Military footwear. At the same time, Creative Recreation has started to become a more meaningful contributor to our profitability following the work we’ve done to improve the brand’s supply chain.”

“Our fourth quarter and full year results demonstrate the earnings power of our business model. We were able to increase profitability at a faster rate than sales by leveraging the leaner, more efficient operating expense structure we’ve put in place,” continued Mr. Sharp. “We are confident that the combination of our product and marketing strategies, diverse portfolio of authentic brands, and our strong retail relationships, provides us with continued growth opportunities in 2015 and beyond.”

Fourth Quarter Review
 
Net sales for the fourth quarter increased 28.2% to $78.9 million compared to $61.6 million a year ago. Wholesale sales for the fourth quarter increased 30.0% to $62.0 million including $3.3 million in Creative Recreation branded sales as compared to $47.7 million for the same period in 2013. Retail sales for the fourth quarter increased 6.6% to $13.7 million compared to $12.9 million for the same period last year. Military segment sales for the fourth quarter increased to $3.2 million compared to $1.0 million in the fourth quarter of 2013.

Gross margin in the fourth quarter of 2014 was $27.6 million, or 35.0% of sales, compared to $21.8 million, or 35.4% of sales, for the same period last year. The 40 basis point decrease was driven by higher military sales which carry lower gross margins than wholesale and retail.

Selling, general and administrative (SG&A) expenses were $20.7 million compared to $18.5 million a year ago. The $2.2 million increase in SG&A expenses was due to higher compensation expense, higher variable expenses associated with the increase in sales and additional expenses associated with the Creative Recreation brand, which was acquired in December 2013. As a percent of sales, SG&A improved 330 basis points to 26.2% of net sales compared to 29.9% sales last year.
Income from operations was $7.0 million, or 8.8% of net sales, compared to $3.4 million, or 5.6% of net sales a year ago which excludes expenses associated with the acquisition of Creative Recreation.

Interest expense was $0.2 million for the fourth quarter of 2014 and 2013.

The Company’s funded debt was $36.3 million at December 31, 2014 versus $38.4 million at December 31, 2013.

Inventory increased 9.0%, or $7.1 million, to $85.2 million at December 31, 2014 compared with $78.2 million on the same date a year ago.

Conference Call Information
 
The Company’s conference call to review fourth quarter 2014 results will be broadcast live over the internet today, Thursday, February 12, 2015 at 4:30 p.m. 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 growth opportunities (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, 2013 (filed March 6, 2014) and quarterly reports on Form 10-Q for the quarters ended March 31, 2014 (filed May 1, 2014), June 30, 2014 (filed July 30, 2014), and September 30, 2014 (filed October 29, 2014). 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, 2014			December 31, 2013
		Unaudited			Audited
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents		$	4,616,694		$	4,215,617
Trade receivables – net			55,807,103			49,069,668
Other receivables			476,480			325,888
Inventories			85,237,042			78,171,670
Income tax receivable			-			242,228
Deferred income taxes			1,291,907			1,104,050
Prepaid expenses			2,553,442			2,529,407
Total current assets			149,982,668			135,658,528
FIXED ASSETS – net			26,264,641			26,205,080
IDENTIFIED INTANGIBLES			36,681,644			36,807,099
OTHER ASSETS			299,490			354,051
TOTAL ASSETS		$	213,228,443		$	199,024,758
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable		$	15,116,131		$	11,486,473
Accrued expenses:
Taxes - other			532,470			901,116
Income tax payable			2,687,535			-
Other			6,873,604			5,028,850
Total current liabilities			25,209,740			17,416,439
LONG TERM DEBT			36,270,373			38,388,198
DEFERRED INCOME TAXES			12,928,048			11,750,718
DEFERRED LIABILITIES			472,364			255,906
TOTAL LIABILITIES			74,880,525			67,811,261
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and outstanding December 31, 2014 - 7,550,126; December 31, 2013 - 7,536,448			70,460,672			70,153,570
Retained earnings			67,887,246			61,059,927
Total shareholders' equity			138,347,918			131,213,497
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	213,228,443		$	199,024,758

Rocky Brands, Inc. and Subsidiaries Condensed Consolidated Statements of Operations
		Three Months Ended								Year Ended
		December 31,								December 31,
			2014				2013				2014				2013
		Unaudited				Unaudited				Unaudited				Audited
NET SALES		$	78,906,687			$	61,559,288			$	286,242,169			$	244,870,731
COST OF GOODS SOLD			51,258,565				39,737,764				189,881,444				161,328,280
GROSS MARGIN			27,648,122				21,821,524				96,360,725				83,542,451
OPERATING EXPENSES
Selling, general and administrative expenses			20,677,128				18,548,044				80,597,934				71,351,688
Acquisition related expenses			-				1,028,526				-				1,172,047
Total operating expenses			20,677,128				19,576,570				80,597,934				72,523,735
INCOME FROM OPERATIONS			6,970,994				2,244,954				15,762,791				11,018,716
OTHER INCOME AND (EXPENSES):
Interest expense			(246,210	)			(211,621	)			(943,154	)			(688,502	)
Gain on bargain purchase			-				601,975								601,975
Other – net			(52,832	)			(189,938	)			(78,455	)			(116,665	)
Total other - net			(299,042	)			200,416				(1,021,609	)			(203,192	)
INCOME BEFORE INCOME TAXES			6,671,952				2,445,370				14,741,182				10,815,524
INCOME TAX EXPENSE			2,200,410				671,186				4,895,884				3,442,768
NET INCOME		$	4,471,542			$	1,774,184			$	9,845,298			$	7,372,756
INCOME PER SHARE
Basic		$	0.59			$	0.24			$	1.30			$	0.98
Diluted		$	0.59			$	0.24			$	1.30			$	0.98
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic			7,550,088				7,520,361				7,544,936				7,517,364
Diluted			7,550,088				7,520,361				7,544,936				7,517,364

Reconciliation of Income per Diluted Share on a GAAP Basis to a Non-GAAP Basis
		Three Months Ended December 31, 2013
		(Unaudited)
		GAAP Basis				Acquisition Related Expenses and Income				Creative Recreation December Operations				Non GAAP Basis
NET SALES		$	61,559,288			$	-			$	-			$	61,559,288
COST OF GOODS SOLD			39,737,764				-				-				39,737,764
GROSS MARGIN			21,821,524				-				-				21,821,524
OPERATING EXPENSES
Selling, general and administrative expenses			18,548,044				-				172,418				18,375,626
Acquisition related expenses			1,028,526				1,028,526				-				-
Total operating expenses			19,576,570				1,028,526				172,418				18,375,626
INCOME FROM OPERATIONS			2,244,954				(1,028,526	)			(172,418	)			3,445,898
OTHER INCOME AND (EXPENSES):
Interest expense			(211,621	)			-				-				(211,621	)
Gain on bargain purchase			601,975				601,975				-				-
Other – net			(189,938	)			-				-				(189,938	)
Total other - net			200,416				601,975				-				(401,559	)
INCOME BEFORE INCOME TAXES			2,445,370				(426,551	)			(172,418	)			3,044,339
INCOME TAX EXPENSE			671,186				(149,293	)			(60,346	)			880,825
NET INCOME		$	1,774,184			$	(277,258	)		$	(112,072	)		$	2,163,514
INCOME PER DILUTED SHARE		$	0.24			$	(0.04	)		$	(0.01	)		$	0.29

Reconciliation of Income per Diluted Share on a GAAP Basis to a Non-GAAP Basis
		Year Ended December 31, 2013
		(Unaudited)
		GAAP Basis				Acquisition Related Expenses and Income				Creative Recreation December Operations				Non GAAP Basis
NET SALES		$	244,870,731			$	-			$	-			$	244,870,731
COST OF GOODS SOLD			161,328,280				-				-				161,328,280
GROSS MARGIN			83,542,451				-				-				83,542,451
OPERATING EXPENSES
Selling, general and administrative expenses			71,351,688				-				172,418				71,179,270
Acquisition related expenses			1,172,047				1,172,047				-				-
Total operating expenses			72,523,735				1,172,047				172,418				71,179,270
INCOME FROM OPERATIONS			11,018,716				(1,172,047	)			(172,418	)			12,363,181
OTHER INCOME AND (EXPENSES):
Interest expense			(688,502	)			-				-				(688,502	)
Gain on bargain purchase			601,975				601,975				-				-
Other – net			(116,665	)			-				-				(116,665	)
Total other - net			(203,192	)			601,975				-				(805,167	)
INCOME BEFORE INCOME TAXES			10,815,524				(570,072	)			(172,418	)			11,558,014
INCOME TAX EXPENSE			3,442,768				(199,525	)			(60,346	)			3,702,639
NET INCOME		$	7,372,756			$	(370,547	)		$	(112,072	)		$	7,855,375
INCOME PER DILUTED SHARE		$	0.98			$	(0.05	)		$	(0.01	)		$	1.04

Contacts
Rocky Brands, Inc./ Company Contact:Jim McDonald, 740-753-1951/ Chief Financial Officer
or
Investor Relations:ICR, Inc./ Brendon Frey, 203-682-8200


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