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Second Quarter Net Sales Increased 16% to a Record $68.8 Million

NELSONVILLE, Ohio--(BUSINESS WIRE)-- Rocky Brands, Inc. (RCKY) today announced financial results for its second quarter ended June 30, 2014.

Second Quarter 2014 Sales and Income

Second quarter net sales increased 15.8% to $68.8 million versus net sales of $59.4 million in the second quarter of 2013. The Company reported second quarter net income of $1.5 million, or $0.20 per diluted share compared with net income of $1.8 million, or $0.24 per diluted share in the second quarter of 2013.

David Sharp, President and Chief Executive Officer, commented, The investments weve made towards growing our brands and overall business continue to fuel record top-line results. For the second consecutive quarter each of our major wholesale categories, Work, Western, and Hunting, generated double digit sales increases on a percentage basis while the momentum in our commercial military and duty businesses accelerated following a solid start to the year. As we move into the back half of 2014, we believe we can continue to drive growth through compelling and innovative product introductions and begin delivering improved profitability through gross margin expansion and increased operating expense leverage. Our plans include capitalizing on the opportunities we believe exist for Creative Recreation within the broader casual footwear market. We are pleased with our recent accomplishments and look forward to building on our success in the quarters and years ahead.

Second Quarter Review

Net sales for the second quarter increased 15.8% to $68.8 million compared to $59.4 million a year ago. Wholesale sales for the second quarter increased 23.7% to $56.7 million compared to $45.8 million for the same period in 2013. This included a 16.8% increase in wholesale sales of the Companys legacy brands. Retail sales for the second quarter increased to $10.1 million compared to $9.8 million for the same period last year. Military segment sales for the second quarter decreased to $2.0 million compared to $3.8 million in the second quarter of 2013.

Gross margin in the second quarter of 2014 was $22.6 million, or 32.8% of sales, compared to $20.3 million, or 34.2% of sales, for the same period last year. The 140 basis point decrease was driven by the combination of lower wholesale margins due primarily to costs associated with the seeding program with a key retail partner we announced in the first quarter of 2014 and lower retail gross margin than a year ago resulting from the completed transition to a web based retail platform which carries lower gross margin and lower operating expenses compared to the previous mobile store structure.

Selling, general and administrative (SG&A) expenses were $20.0 million, or 29.1% of net sales, for the second quarter of 2014 compared to $17.4 million, or 29.4% of net sales, a year ago. The $2.6 million increase in SG&A expenses was due largely to the additional expenses associated with the Creative Recreation brand, which was acquired in December 2013, and higher compensation expense related to a new mid-year bonus program that wasnt in place a year ago. The 30 basis point improvement in SG&A as a percent of net sales was driven by leveraging expenses on higher sales.

Income from operations was $2.5 million, or 3.7% of net sales, compared to $2.9 million, or 4.8% of net sales, a year ago.

Interest expense was $0.2 million for the second quarter of 2014, versus $0.1 million for the same period last year.

The Companys funded debt was $43.4 million at June 30, 2014 versus $31.4 million at June 30, 2013. The majority of the increase was related to additional borrowings to fund the acquisition of Creative Recreation in the fourth quarter of 2013.

Inventory increased 6.5%, or $5.3 million, to $86.4 million at June 30, 2014 compared with $81.2 million on the same date a year ago. Inventory at June 30, 2014 included approximately $2.8 million associated with the acquisition of Creative Recreation. Based on current sales trends and the fall order book, the Company remains comfortable with its current inventory position.

Conference Call Information

The Companys conference call to review second quarter 2014 results will be broadcast live over the internet today, Wednesday, July 23, 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 sales and profitability (paragraph 3) and inventory (paragraph 10). These forward-looking statements involve numerous risks and uncertainties, including, without limitation, the various risks inherent in the Companys business as set forth in periodic reports filed with the Securities and Exchange Commission, including the Companys annual report on Form 10-K for the year ended December 31, 2013 (filed March 6, 2014) and quarterly report on Form 10-Q for the quarter ended March 31, 2014 (filed May 1, 2014). One or more of these factors have affected historical results, and could in the future affect the Companys 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

 
 
June 30, 2014 December 31, 2013 June 30, 2013
Unaudited Audited Unaudited
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 3,960,134 $ 4,215,617 $ 2,855,524
Trade receivables net 54,088,664 49,069,668 46,429,928
Other receivables 754,889 325,888 496,669
Inventories 86,438,290 78,171,670 81,159,941
Income tax receivable 7,039 242,228 270,878
Deferred income taxes 1,104,050 1,104,050 1,252,030
Prepaid expenses   2,657,619   2,529,407   2,862,360
Total current assets 149,010,685 135,658,528 135,327,330
FIXED ASSETS net 27,641,771 26,205,080 24,418,143
IDENTIFIED INTANGIBLES 36,741,214 36,807,099 30,503,659
OTHER ASSETS   348,958   354,051   330,743
TOTAL ASSETS $ 213,742,628 $ 199,024,758 $ 190,579,875
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 18,433,803 $ 11,486,473 $ 15,252,448
Accrued expenses:
Taxes - other 539,919 901,116 793,439
Other   7,272,867   5,028,850   3,972,681
Total current liabilities 26,246,589 17,416,439 20,018,568
LONG TERM DEBT 43,359,640 38,388,198 31,438,173
DEFERRED INCOME TAXES 11,750,718 11,750,718 11,148,333
DEFERRED LIABILITIES   293,823   255,906   255,906
TOTAL LIABILITIES 81,650,770 67,811,261 62,860,980
SHAREHOLDERS' EQUITY:
Common stock, no par value;

25,000,000 shares authorized; issued and outstanding June 30, 2014 - 7,543,210; December 31, 2013 - 7,536,448; June 30, 2013 - 7,516,448

70,304,984 70,153,570 69,862,770
Retained earnings   61,786,874   61,059,927   57,856,125
 
Total shareholders' equity   132,091,858   131,213,497   127,718,895
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 213,742,628 $ 199,024,758 $ 190,579,875
 
       

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

 
Three Months Ended Six Months Ended
June 30, June 30,
  2014         2013     2014         2013  
NET SALES $ 68,822,520 $ 59,419,751 $ 134,605,804 $ 113,135,227
 
COST OF GOODS SOLD   46,236,858     39,109,264     90,166,993     74,153,970  
 
GROSS MARGIN 22,585,662 20,310,487 44,438,811 38,981,257
 
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES   20,041,283     17,441,736     40,556,822     34,605,918  
 
INCOME FROM OPERATIONS 2,544,379 2,868,751 3,881,989 4,375,339
 
OTHER INCOME AND (EXPENSES):
Interest expense (225,299 ) (147,194 ) (443,972 ) (276,752 )
Other net   6,381     4,723     232     (211 )
Total other - net (218,918 ) (142,471 ) (443,740 ) (276,963 )
 
INCOME BEFORE INCOME TAXES 2,325,461 2,726,280 3,438,249 4,098,376
 
INCOME TAX EXPENSE   814,000     954,000     1,203,000     1,434,000  
 
NET INCOME $ 1,511,461   $ 1,772,280   $ 2,235,249   $ 2,664,376  
 
INCOME PER SHARE
Basic $ 0.20 $ 0.24 $ 0.30 $ 0.35
Diluted $ 0.20 $ 0.24 $ 0.30 $ 0.35
 
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic   7,543,173     7,516,448     7,541,462     7,516,306  
Diluted   7,543,173     7,516,448     7,541,462     7,516,306  

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20140723006169r1&sid=acqr7&distro=nx

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

Source: Rocky Brands, Inc.

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