Rocky Brands, Inc. Announces Second Quarter 2013 Results

Net Sales Increased 34% to $59.4 Million

Net Income Increased to $1.8 Million from $200,000

Earnings Per Share Increased to $0.24 from $0.03

NELSONVILLE, Ohio--(BUSINESS WIRE)-- Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial results for its second quarter ended June 30, 2013.

For the second quarter of 2013, net sales increased 33.8% to $59.4 million versus net sales of $44.4 million for the second quarter of 2012. The Company reported net income of $1.8 million, or $0.24 per diluted share, for the second quarter of 2013, versus net income of $0.2 million, or $0.03 per diluted share, for the second quarter of 2012.

For the first six months of 2013, net sales increased 15.8% to $113.1 million versus net sales of $97.7 million in the first half of 2012. The Company reported net income of $2.7 million, or $0.35 per diluted share, for the first half of 2013, versus net income of $0.9 million, or $0.13 per diluted share, for the first half of 2012.

In the second quarter of 2012, severe storms knocked out power to the Company’s distribution center in Logan, OH. As a result, approximately $2.5 million of sales shifted from the second quarter of 2012 into the third quarter of 2012 which had a negative impact of approximately $0.06 per share in the second quarter and in the first half of 2012.

“We had a tremendous second quarter with sales and earnings that were well ahead of plan,” said David Sharp, President and Chief Executive Officer. “Our strong performance included sales gains in each of our reporting segments– Wholesale, Retail and Military. In Wholesale, it was especially gratifying to see our work and hunting categories post strong double digit sales increases after successfully navigating through a second consecutive mild winter. At the same time, Durango’s momentum accelerated during the second quarter as the brand’s western and lifestyle collections collectively were up 68% year over year while our commercial military business reversed recent trends to post a high single digit sales gain. In Retail, we continued to see steady progress in transitioning our Lehigh customers to our web based solution. Increased business-to-consumer e-commerce sales also contributed to the improvement in our Retail business. And our Military segment sales increased significantly in the quarter as production ramped up on our current U.S. military contract. With our top-line firing on all cylinders, we were able to drive 410 basis points of operating expense leverage and deliver earnings per share that were up eightfold from a year ago.”

Second Quarter Review

Net sales for the second quarter increased 33.8% to $59.4 million compared to $44.4 million a year ago. Wholesale segment sales for the second quarter increased 32.1% to $45.8 million compared to $34.7 million for the same period in 2012 driven by strong gains in our work, hunting and western categories. Retail segment sales for the second quarter increased 7.0% to $9.8 million compared to $9.1 million for the same period last year with the increase driven by a significant gain in our business-to-consumer e-commerce sales. Military segment sales for the second quarter increased to $3.8 million compared to $0.6 million in the second quarter of 2012.

Gross margin for the second quarter of 2013 was $20.3 million, or 34.2% of sales, compared to $15.4 million, or 34.6% of sales, for the same period last year. The 40 basis point decrease in our gross margin was driven by increased military segment sales, which carry lower gross margins, partially offset by increased gross margins in our wholesale and retail segments which were up 130 basis points and 20 basis points, respectively.

Selling, general and administrative (SG&A) expenses were $17.4 million, or 29.4% of net sales, for the second quarter of 2013 compared to $14.9 million, or 33.5% of net sales, a year ago. The 410 basis point improvement in SG&A as a percent of net sales was driven by higher sales. The dollar increase in SG&A was driven by an increase in advertising expenses as well as increases in selling & distribution expenses associated with additional sales.

Income from operations was $2.9 million, or 4.8% of net sales, compared to $0.5 million, or 1.0% of net sales. The 380 basis point improvement in operating margin was driven by SG&A expense leverage on higher sales, partially offset by the decline in gross margin.

The Company’s funded debt increased 5.1% to $31.4 million at June 30, 2013 versus $29.9 million at June 30, 2012. The increase is primarily due to increased working capital to support increased sales.

Inventory increased 9.6% to $81.2 million at June 30, 2013 compared with $74.0 million on the same date a year ago. The increase is primarily attributable to additional inventory to support increased sales.

Conference Call Information

The Company’s conference call to review second quarter fiscal 2013 results will be broadcast live over the internet today, Tuesday, July 23, 2013 at 4:30 pm Eastern Time. The broadcast will be hosted at

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® Footwear.

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, 2012 (filed March 4, 2013 and amended on March 5, 2013) and quarterly report on Form 10-Q for the quarter ended March 31, 2013 (filed April 25, 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

June 30, 2013 December 31, 2012 June 30, 2012
Unaudited Audited Unaudited
Cash and cash equivalents $ 2,855,524 $ 4,022,579 $ 1,850,905
Trade receivables – net 46,429,928 44,555,057 36,729,487
Other receivables 496,669 575,984 760,596
Inventories 81,159,941 67,196,245 74,048,921
Income tax receivable 270,878 - 933,293
Deferred income taxes 1,252,030 1,252,030 1,154,040
Prepaid expenses   2,862,360   2,127,726   2,240,461
Total current assets 135,327,330 119,729,621 117,717,703
FIXED ASSETS – net 24,418,143 24,252,465 24,822,919
IDENTIFIED INTANGIBLES 30,503,659 30,498,802 30,490,861
OTHER ASSETS   330,743   363,527   436,525
TOTAL ASSETS $ 190,579,875 $ 174,844,415 $ 173,468,008
Accounts payable $ 15,252,448 $ 9,930,518 $ 10,740,705
Accrued expenses:
Taxes - other 793,439 704,064 595,214
Income tax payable - 335,210 -
Other   3,972,681   3,324,668   3,024,938
Total current liabilities 20,018,568 14,294,460 14,360,857
LONG TERM DEBT 31,438,173 23,461,340 29,909,957
DEFERRED INCOME TAXES 11,148,333 11,148,333 10,987,395
DEFERRED LIABILITIES   255,906   303,406   488,437
TOTAL LIABILITIES 62,860,980 49,207,539 55,746,646
Common stock, no par value;

25,000,000 shares authorized; issued and outstanding

June 30, 2013 - 7,516,448; December 31, 2012 -

7,503,568; June 30, 2012 - 7,503,568

69,862,770 69,694,770 69,694,770
Retained earnings   57,856,125   55,942,106   48,026,592
Total shareholders' equity   127,718,895   125,636,876   117,721,362
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 190,579,875 $ 174,844,415 $ 173,468,008

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Three Months Ended Six Months Ended
June 30, June 30,
  2013         2012     2013         2012  
NET SALES $ 59,419,751 $ 44,408,358 $ 113,135,227 $ 97,734,276
COST OF GOODS SOLD   39,109,264     29,056,731     74,153,970     64,360,568  
GROSS MARGIN 20,310,487 15,351,627 38,981,257 33,373,708
ADMINISTRATIVE EXPENSES   17,441,736     14,893,727     34,605,918     31,635,785  
INCOME FROM OPERATIONS 2,868,751 457,900 4,375,339 1,737,923
Interest expense (147,194 ) (130,606 ) (276,752 ) (274,953 )
Other – net   4,723     13,270     (211 )   4,281  
Total other - net (142,471 ) (117,336 ) (276,963 ) (270,672 )
INCOME BEFORE INCOME TAXES 2,726,280 340,564 4,098,376 1,467,251
INCOME TAX EXPENSE   954,000     122,000     1,434,000     528,000  
NET INCOME $ 1,772,280   $ 218,564   $ 2,664,376   $ 939,251  
Basic $ 0.24 $ 0.03 $ 0.35 $ 0.13
Diluted $ 0.24 $ 0.03 $ 0.35 $ 0.13
Basic   7,516,448     7,503,568     7,516,306     7,503,419  
Diluted   7,516,448     7,503,568     7,516,306     7,503,419  

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

Source: Rocky Brands, Inc.