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Section 1: 8-K (8-K)

2018 Q3 8-K





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________



FORM 8-K

________________________________

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 23, 2018

________________________________

 

ROCKY BRANDS, INC.

(Exact name of registrant as specified in its charter)





 

 

 

 

Ohio

 

001-34382

 

31-1364046

(State or other jurisdiction
of incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)



39 East Canal Street, Nelsonville, Ohio 45764

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (740) 753-1951

 

Not Applicable

(Former name or former address, if changed since last report.)

________________________________

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):





 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).



Emerging growth company 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 




 



Item 2.02 Results of Operations and Financial Condition



On October 23, 2018, Rocky Brands, Inc. (the "Company") issued a press release entitled "Rocky Brands, Inc. Announces 2018 Third Quarter Results" regarding its consolidated financial results for the quarter ended September 30, 2018. A copy of the Company's press release is furnished as Exhibit 99 to this Form 8-K and is incorporated herein by reference.



The information in this Form 8-K and accompanying press release is being furnished under Item 2.02 and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.



The information contained or incorporated by reference in this Form 8-K 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, 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 Form 8-K 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 Form 8-K are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.



Item 9.01 Financial Statements and Exhibits.



(d) Exhibits.





 

 



 

 

Exhibit 99*

 

Press Release, dated October 23, 2018 entitled "Rocky Brands, Inc. Announces 2018 Third Quarter Results”.



 

 



 

 



* Such press release is being "furnished" (not filed) under Item 2.02 of this Current Report on Form 8-K


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.





 

Date: October 23, 2018





 



Rocky Brands, Inc.



 



/s/ Tom Robertson



Tom Robertson



Executive Vice President, Chief Financial Officer and Treasurer




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Section 2: EX-99 (EX-99)

Q3 2018 Earnings Press Release RCKY

Picture 2

ROCKY BRANDS, INC.

Rocky Brands, Inc. Announces 2018 Third Quarter Results

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



NELSONVILLE, Ohio, October 23, 2018 – 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.



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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 $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®.















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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.







 

Company Contact:

Tom Robertson



Chief Financial Officer



(740) 753-9100



 

Investor Relations: 

Brendon Frey



ICR, Inc.



(203) 682-8200



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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 outstanding September 30, 2018 - 7,421,317;  December 31, 2017 - 7,398,654 and 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 

















4


 

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 















































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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.



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